With another CEO out, Yahoo's turnaround stalled

Thompson resigns after resume scandal; what happens to Yahoo now?

For the second time in eight months, Yahoo is without a permanent CEO. The latest development brings more trouble to a company struggling to regain its stature in the industry.

Yahoo announced on Sunday that Scott Thompson, its CEO since January, has left the company. Thompson, 54, had been under heavy fire in recent weeks since it was revealed that there was an error in the IT credentials listed on his resume -- an error that also appeared on the company's website and in documents it had filed with the U.S. Securities and Exchange Commission.

With Thompson out, Ross Levinsohn, who has been serving as Yahoo's head of global media, will step in as interim CEO while the board searches for a permanent replacement.

Thompson's departure comes nearly a week after the company announced that a special three-member committee had been set up to investigate the CEO, his academic credentials and the circumstances surrounding his hiring. Thompson's resume indicates that he has a degree in computer science, but he does not hold such a degree.

Yahoo had initially issued a statement calling it an inadvertent mistake.

"It looks like Thompson's mythical computer science degree is moving from 'innocent mistake' into 'intentional misrepresentation' territory," said Dan Olds, an analyst at Gabriel Consulting Group. "It would be hard for any CEO to stay in place under those circumstances, but factor in Yahoo's highly public struggles to remain relevant in the industry and keeping Thompson as CEO becomes impossible."

Despite the investigation, the Wall Street Journal reported on Monday that Thompson might have agreed to leave after informing the Yahoo board that he has thyroid cancer. Citing unnamed sources, the Journal said he is beginning treatment.

The turmoil has come just as the Internet pioneer has been fighting to regain its position as a top-tier company alongside current online leaders Google and Facebook. Former CEO Carol Bartz left the company last September. Now just eight months later, her successor is gone.

The recent developments, and the bad publicity they engendered, have been a distraction from the company's job at hand, say industry analysts.

"This is, of course, a huge distraction that pulls attention away from Yahoo's attempt to define their role in the industry," said Olds. "It just cements in people's minds that Yahoo is a bumbling company that can't even hire a new CEO right. The effect on internal morale is just as harmful."

Yahoo needs all hands on deck to execute its turnaround plan. That means the company's employees need to believe in Yahoo and its future.

"Employees can't be feeling great about the competence of the Yahoo board and upper management these days -- which makes their tasks doubly hard," Olds said.

Rob Enderle, an analyst at Enderle Group, noted that the company had no choice but to be rid of Thompson -- but that won't make it any easier to recover from the latest brouhaha.

"Initially, it will stall the turnaround efforts and it will now be far more difficult to get someone qualified," Enderle said. "However, Thompson wasn't really qualified either, with no Internet publishing or turnaround experience, and the new board might be better focused on their search. But anyone smart enough to turn Yahoo around may also be smart enough to avoid the job in the first place."

Patrick Moorhead, an analyst at Moor Insights & Strategy, said the turmoil around Thompson is a big setback for the company, but it could end up being beneficial in the long run.

"Thompson's removal will be a good thing for Yahoo in the long term," he said. "He didn't exactly demonstrate strategic capabilities, as his first decisions were layoffs, not setting strategic direction as it should have been. He really put the cart before the horse, which hurt employee morale and investor confidence.

"This now gives the board a chance to find the best leader -- one who can set a solid strategic direction and inspire and motivate employees to execute on it," Moorhead said.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin and on Google+, or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

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