Analysts: New Yahoo CEO Has Product, But Not Content Expertise

6:53 AM PST 07/17/2012 by Georg Szalai
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Some observers say Marissa Mayer could reenergize the online giant, while one analyst argues that "Yahoo needs a strategic visionary, not a product engineer."

Yahoo analysts on Tuesday weighed in on the pros and cons of the Internet giant's decision to hire long-time Google executive Marissa Mayer as its new president and CEO and her key challenges.

Ahead of Yahoo's quarterly earnings conference call Tuesday afternoon, many emphasized that her technical background makes Mayer more likely to focus on product development and management than on entertainment deals and broader content strategy.

Yahoo's stock was up minimally in early Tuesday trading. As of 9:45am ET, it was up 0.4 percent at $15.71 in a sign that Wall Street saw the news as a slight positive.

"She was one of Google's earliest employees and held a number of high-profile senior positions at the company, including managing its search business," highlighted Barclays Capital analyst Anthony DiClemente in a note to investors. "We view Ms. Mayer's appointment as an incremental positive for Yahoo, and we believe that her track record in product development will help set a strategic direction for the company with an emphasis on improving its user experiences."

Mayer's background as an engineer will give her credibility with Yahoo's staff and will help her to "focus the company's efforts on creating new and innovative products, where we believe it has lost ground to competitors in recent years, while also improving its existing product offerings," DiClemente said.

He did acknowledge though that she doesn't have the media and entertainment experience that would help Yahoo with its strategy of offering more content. "While Ms. Mayer does not possess a content background, we expect Yahoo's media strategy to continue forward with an emphasis on developing and improving its content offerings, as Yahoo's core content properties remain its greatest assets for driving traffic, in our view," he said.

Miller Tabak analyst David Joyce before the market open on Tuesday said that Mayer's hiring "should probably be a better positive for the stock long-term than the 2 percent after-market appreciation." But he cautioned that "Yahoo's turnaround with its new CEO will likely take some time."

Pivotal Research Group analyst Brian Wieser lauded Mayer for being a well-liked leader and  having "relatively strong competencies on the product and engineering side of the business."

"While we believe that Ms. Mayer is very well regarded and could ultimately be highly successful, she seemingly does not have experience in several areas that are critical to Yahoo’s turnaround, introducing some incremental risks around the company’s future prospects," he said.

He also warned of another possible executive exodus. "We’re now concerned about the fate of Ross Levinsohn, the executives he has brought aboard and any initiatives that may have been undertaken during his tenure as interim CEO," he told THR.

Forrester analyst Shar VanBoskirk was among the most critical of Mayer's appointment. "Yahoo needs a strategic visionary, not a product engineer," she said. "Yahoo's fundamental problem is that it has too many disparate products with no clear unifying thread that ties them all together. And Mayer's background is in product development...not corporate strategy, not marketing, not brand definition...the areas where Yahoo has the most critical need."

She counted four different strategies that Yahoo has pursued over the last four years. "Late Jerry Yang era Yahoo was all about building Yahoo as a provider of ad management technology and a portable social ID for consumers," she said. "[Carol] Bartz era Yahoo refocused the company on being "the best media company in the world" by developing content creation resources and proprietary online magazines. Then, Scott Thompson re-introduced Yahoo shopping and Yahoo as a commerce technology provider."

Concluded VanBoskirk: "Now, Yahoo seems to be chasing a new vision: one which emphasizes individual Yahoo products over a big-picture brand."

But she expressed hope that Mayer will prove her wrong. Defining a clear vision for the Yahoo brand and losing extraneous products that have nothing to do with that vision would go a long way towards rejuvenating Yahoo, she said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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