Analysts: New Yahoo CEO Bartz won't rush into Microsoft deal

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Yahoo's new CEO, Carol Bartz, is unlikely to sell Yahoo's search business to Microsoft unless it fits into her own plan for how to fix Yahoo, despite rumors that a deal between the two is imminent, analysts said Wednesday.

Bartz, the former Autodesk chairman, CEO and president tapped Tuesday as Jerry Wang's replacement to lead Yahoo, has a reputation as a tough and strong-willed executive, and would not have taken the job if it meant selling Yahoo's substantial search assets to Microsoft straightaway, said Karsten Weide, an analyst with research firm IDC.

"Judging from what I have heard about her, she would not have agreed to take on this job without telling the board, 'I'm the new CEO, I need to at least take a look at this. Let me make a decision about if this is a good thing or not,'" he said.

Greg Sterling, principal analyst with Sterling Market Intelligence, agreed that Bartz will not give up Yahoo's search assets -- or the entire company, for that matter -- very easily. "It's not a given she'll sell the business," he said, noting that comments Bartz made on a conference call Tuesday point to her intention to "settle in for the longer term."

"She has talked like someone who is pretty passionate about the opportunity" to pull Yahoo out of its slump, Sterling said.

In Weide's opinion, outsourcing Yahoo's online search business to Microsoft would be a "strategic mistake." He thinks Yahoo remains a fundamentally sound company despite the opinion of those who believe doing a deal with Microsoft is the only way for it to compete successfully with Google.

"If you look at the numbers and the assets they have, they are a very strong company," Weide said. "Obviously they are very troubled, but it's nothing that couldn't be fixed."

Weide cited Yahoo's sustained profitability, experience in online media, broad audience reach and position as the market leader in online display advertising as reasons the company could possibly return to some of its former glory, even without Microsoft.

Yahoo has lost substantial competitive ground to Google in search advertising, and it saw its stock price tumble as its former CEO fought off Microsoft's advances before resigning last year. It has also laid off thousands of employees.

"There is potential that needs to be unlocked again at Yahoo, and I think Carol Bartz is a good person to have a good shot at it," Weide said.

Not everyone shares his optimism over Yahoo's prospects, especially as Google's lead in search advertising has only widened since Microsoft made its first unsolicited bid for Yahoo on Feb. 1, 2008. Others still think a deal between them would be the best thing for both companies.

"From a search perspective, Microsoft needs Yahoo and Yahoo needs Microsoft if they are to create a credible alternative to Google," said Gartner Vice President and Fellow Neil MacDonald via e-mail. "Neither one has shown they are capable of doing this themselves and the gap is only increasing. An infusion of cash from Microsoft could enable the new CEO to reinvigorate the Yahoo brand and properties."

Yahoo cofounder Wang said he was leaving Yahoo in November after bowing to company shareholders and the board of directors, who believed he botched the opportunity to sell Yahoo's search business or the entire company to Microsoft last year.

On Tuesday, the Yahoo board picked Bartz to replace him, passing over Yahoo President Sue Decker, who was vying for the position and was a strong Wang supporter. Consequently, Decker resigned from Yahoo and will leave after a brief transition period.

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