Marissa Mayer: Saviour or Symbol?

In the tech world, probably more than any other sector, a charismatic and visionary CEO is all important. Yahoo! Inc. (NASDAQ:YHOO), a company with an already ailing business model, has failed again and again in this key area. With last week’s appointment of Marissa Mayer, a former Google Inc (NASDAQ:GOOG) executive, the company is hoping to change this pattern.

Mayer’s key attribute in her tenure at the company so far has been her personae. She is a breath of fresh air to the tech industry. Her femininity alone, makes her stand out among most of Silicon Valley’s CEOs.

According to Dr. Joseph M. Pastore, a veteran of the tech industry, and a Professor at Pace University, this will be one of the key things she brings to the company in the future.

Pastore has worked on executive development with some of the biggest names in tech including Verizon Communications Inc.(NYSE:VZ), International Business Machines Corp. (NYSE:IBM), and BT Group plc (LON:BT.A). He knows what to look for in a CEO, and his initial assessment of Mayer is a good one.

Pastore sees her role thus far as somewhat symbolic, “I see her as a symbol of “creative destruction”, re-direction, transformation.  That is evident in all the “packaging”—young, woman, pregnant, Google imprint.”, her presence signifies a turnaround at the company. Whether or not that turnaround occurs more than metaphorically, will be the defining challenge of her time with the company.

The decision that resulted in Myer’s being chosen over Yahoo veteran Ross Levinson, the front runner for the job, was not all that surprising in Pastore’s eyes. He says that “this appointment is all about “shock”, contrarian behavior, new direction, transformation.   I am speculating, of course, but the medium is the message.  To move from “interim CEO”  to permanent, doesn’t have quite the same sizzle as pulling in a fresh face.”

The change in philosophy at the company begs a question about Dan Loeb’s involvement in the appointment. Pastore can’t answer that question specifically, but “His rep is that he is not shy about getting into the fray, (hedge fund gals and guys are not) and the “word” is that he was involved.”

Any hedge fund observer can see, however, that the deal has Loeb’s fingerprints all over it. His recent public campaign at the company, culminating in his victory in removing Scott Thompson as CEO, means he would no longer be happy consigned to a sideline role in such an important company process.

So far, Yahoo has achieved a symbolic victory. Yahoo is dead, long live Yahoo, as it were. But is this just a new heading on the corporate documents, or is there a real change coming? Pastore’s assessment suggests that the company has a long, long way to go before it can catch up with its competitors, if that is indeed at all possible.

“I always look to strategic  momentum, and most of all cash, when it comes to competitive advantage.  Yahoo doesn’t come close on either score (last I looked Google has 25 times as much cash and rising revenue momentum compared to a flat revenue pattern at Yahoo—and, to the extent of Yahoo being profitable, its performance is linked to cost cutting, not revenue generation—clearly a finite strategy).  And, worse: Among the young market, Yahoo’s brand/ image pales in comparison to Google, and is a step above AOL.”

Mayer has a long road ahead of her before she can even hope to challenge her former company. There is however a different model that Yahoo can follow in order to achieve long term success, the key lies in growth where its competitors have not concentrated their efforts.

“I have to believe Yahoo’s strategy will be to compete where Google and Microsoft Corporation (NASDAQ:MSFT) are not, to place bets on acquiring emerging initiatives (fully aware that if there is one out there, one can be sure the cash cows will chase it), and concentrate on global, emerging markets where the Yahoo brand probably has its strongest position.”

That strategy has been the one most talked about in relation to Yahoo for months, but it could be identified as a capitulation on the part of the company, consigning itself tot he level of a second rate internet enterprise unable to compete with the big players.

The path itself is fraught with dangers. Emerging markets offer much lower revenues per user and necessitate the establishment of large administrative and strategic operations in the countries the company hopes to succeed in. Home grown tech enterprises also pose a significant risk.

Yahoo has much of this base already locked down. Limited (HKG:1688), its successful Chinese service provider, is one of its most powerful assets according to Dan Loeb and many other analysts. This line of thinking has not done much to increase the company’s value thus far. That poses a significant threat to the business model.

Yahoo! needed a change and it has gotten one in the form of Marissa Mayer. Change in executive form is one thing, it is the company’s brand identity and business model that shareholders are worried about. Mayer needs to do this in order to gain their trust.

One thing that is clear to Pastore, and may disappoint many of the company’s shareholders, is that this appointment signals the board of the company is unwilling to consider sale at this time.

” I really don’t see Mayer’s skill set as one linked to harvesting a company.  And, surely the Yahoo Board can sell the company with much less leadership investment (re: her contract) and public fanfare…And, it is evident in her product development background—a signature and credential one would not need if the task were to sell.”

Many of the company’s shareholders had hoped that Dan Loeb’s charge might lead to a quick turnaround and sale that would release value from their stock.

The company, and its shareholders, have a long and bumpy ride ahead of them as Mayer tries to use her cathartic powers to give Yahoo a new face. For the first time in years interesting times are ahead at Yahoo.