Yahoo's choice of a new corporate head is sending a message that the company will be rebuilt instead of sold, analysts say.
Some analysts do openly question whether new CEO Scott Thompson is too much like failed predecessor Carol Bartz and lacks the skills to bring Yahoo back to its former glory.
"Yahoo has a strong brand and I believe it still has a core from which a much stronger company will grow," said Rob Enderle, an analyst at the Enderle Group. "The problem is that on paper [Thompson] appears to represent a similar mistake to the one they made with Bartz. Their ideal candidate would be someone who recently turned around a company. That's not Thompson's skill set."
Yahoo this morning announced the appointment of Scott Thompson, former president of eBay's PayPal unit, as its CEO. The company, a one-time shining Internet pioneer that slipped into B-level status, has been looking to fill its top spot since September when Bartz was dismissed.
Yahoo long ago had slipped into the shadows of online giants like Google and Facebook, but Bartz's ouster seemed to usher in a new level of trouble for the company.
Yahoo could prove a prize to the right suitor, considering that the company's flagship Web site was the third-most visited in 2011, according to a Nielsen study released this week.
"Yahoo still has a huge presence," said Dan Olds, an analyst at Gabriel Consulting Group. "Yahoo is still one of the most recognized Internet names in the business. Its massive Web traffic gives them time to recapture its mojo and put out new content to capture user attention. The hard part [will be] figuring out what that content how to present it."
That job is now Thompson's.
According to Olds, the new CEOs first task will be to show that Yahoo is still an important Internet player.
"By hiring Thompson, the Yahoo board is clearly saying they want the company rebuilt," Olds said. "If they were looking to sell or break Yahoo up, I think they'd go in a different direction. I think Thompson has marching orders to take the company back to its glory days -- or at least back to a place where it's providing solid performance for investors and has some upside potential."
However, both Olds and Enderle said it's not clear why Thompson was the choice to lead Yahoo out of the mire.
"[Thompson's] background is banking, and PayPal was in comparatively good shape when he got it," noted Enderle. "This is similar to Bartz's experience. She was in packaged software and also doing a sustaining, rather than a turnaround job. Given the shape Yahoo is in, his lack of knowledge on how to turn it around likely had him conclude the job was doable, where a more experienced CEO might have run for the hills."
What does Thompson need to do to get Yahoo moving in the right direction?
"This depends on his mandate," said Allen Weiner, an analyst at Gartner. "If he is charged with getting Yahoo ready for sale or merger, his task is to create more efficient operations. If it is to grow [the company], it's to refine and more clearly define its vision and hit the ground running with at least one new compelling product or service that underscores that vision."
Weiner said he's fairly split between thinking Yahoo should just be put up for sale or try to rebuild. "I would lean toward one last Hail Mary on rebuilding but on a short leash," he added.
Brad Shimmin, an analyst with Current Analysis, said that since Thompson is tasked with stabilizing and growing Yahoo, he must trim some unneeded properties.
"With online advertising dollars still on the rise, I think Yahoo stands a great chance of pulling through this difficult stretch," said Shimmin. "The next 12 months will most certainly give us a good indication of which path Thompson intends to take the company -- toward rejuvenation or liquefaction."
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon's RSS feed . Her e-mail address is email@example.com.