Yahoo’s stock is getting slaughtered on news that its executive team appears to be clueless about what’s happening with Alibaba in China.The transfer of a valuable Alibaba subsidiary, Alipay, to another company is quickly developing into a big scandal, and it’s the type of event that can provide leverage for a shake up at the top of the company.
CEO Carol Bartz’s contract with the company will end in about a year and a half, and everyone expects that she’ll then be done. The question is whether the company will make a change before then. The Alipay scandal might make this more likely.
Some Yahoo shareholders and partners would certainly support an immediate change: One shareholder we spoke with recently is appalled by the job Bartz has done and regards the company’s board as one of the worst the shareholder has ever encountered.
Why the frustration?
In her three-year tenure, Bartz has never expressed a clear vision for the company. She has failed to improve Yahoo’s core business, and she has alienated Yahoo’s Asia partners. On the latter, she irritated Jack Ma, who runs Alibaba and is the one who just transferred Alipay to another company he controls. Masayoshi Son, who runs Softbank, which owns a big piece of Yahoo Japan, and Alibaba, is also sour on Bartz. He was critical of her and Yahoo in an interview with the New York Times.
So will the board can Bartz?
One industry source tells us that Yahoo doesn’t want to oust Bartz without a replacement on deck. Thus, Yahoo’s board has been quietly reaching out to people over the past several months to gauge their interest in taking on the job as CEO, the source says. If and when a suitable replacement is found, the board might hire the person and render Bartz a lame duck (which she is rapidly becoming regardless).
But this latest screw-up in China may force the issue.
The importance of Yahoo’s Asian assets can’t be overstated. Right now, they’re the only thing propping up Yahoo’s stock price. When hedge fund manager David Einhorn decided to go long Yahoo stock recently, he said Yahoo’s 40% stake in the Alibaba Group alone was probably equal to all of Yahoo’s current market valuation.
And now that Yahoo has revealed that it doesn’t even own some of the Asian assets that it has said it owns, Yahoo’s stock is tanking.
UPDATE: After we published this story, a person familiar with the board’s thinking called us to say “the board is fully supportive of Carol.” And to be clear: We are not saying the board has launched an official search for a replacement, with a headhunter and so forth. Rather, our source says, board members have been putting out unofficial feelers, an approach that has the benefit of giving everyone involved full deniability. (We have no doubt that the board will be “fully supportive” of Carol right up until the moment it cans her. And then, of course, the story will be that she resigned.)