CEO Search: Can Anyone Save Yahoo?

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The board is looking for a strong operational manager who has been a CEO at a midsize company, not a strategist, according to sources. That's an indication the board still aims to keep Yahoo independent, whatever other deals the new chief may strike. Indeed, Microsoft CEO Steve Ballmer on Nov. 19 repeated that an acquisition offer is off the table, sending Yahoo shares into a tailspin. The stock plummeted 21%, to an almost six-year low of $9.14. But Ballmer said he's still interested in talking again about a Web search advertising partnership. The candidates considered at the outset, sources say, include Yahoo President Susan Decker as well as outsiders such as Jonathan Miller, former chief of Time Warner (TWX) Internet unit America Online, and News Corp. Chief Operating Officer Peter Chernin. Other observers have floated former Microsoft executive Kevin Johnson, who recently joined Juniper Networks (JNPR) as CEO, former Yahoo COO Dan Rosen­sweig, and Google executives Tim Armstrong and Jonathan Rosenberg.

Yet none of the likely candidates looks ideal. Analysts think Decker is unlikely because investors view her as a key member of the management team that has failed to revitalize Yahoo. Johnson, whose advertising and media role at Microsoft makes him very attractive, is unlikely to leave a job he just took. Miller's tenure at AOL was mixed, and he's not seen as the operations expert Yahoo needs. Chernin would be a catch, but he's negotiating an extension to his lucrative contract at News Corp. And neither he nor the Google executives would be the CEO-level leader Yahoo aims to get.

Facing a Divided Board

Another challenge to drafting a top-notch CEO: They may clash with factions of a divided board. Icahn and his allies may favor quick deals to boost the stock price, while Yang and his fellow longtime directors may continue to resist radical changes. What Yahoo needs, say management recruiters and analysts, is someone with the profile of Hewlett-Packard (HPQ) CEO Mark V. Hurd. A low-key operating wizard from the relative tech backwater of NCR (NCR), Hurd has managed to turn around HP in the three short years since he joined. In fact, one source close to the search says Yahoo isn't ruling out an executive outside the Internet realm. "You need someone who doesn't have the ego of a rock star," says Dona Roche-Tarry, a partner at executive search firm CTPartners. "But the new person would need the strength of character to stand up to Yang and the board."

Problem is, that probably means scaling back Yahoo's ambitions—an unappetizing prospect for a high-powered executive hoping to make a lasting mark.

Hof is BusinessWeek's Silicon Valley bureau chief. With Peter Burrows, Aaron Ricadela, and Ron Grover.