Investors were skeptical when Scott Thompson became Yahoo!’s (NASDAQ: YHOO) new chief executive. He was nothing more than an e-commerce expert who had run eBay’s (NASDAQ: EBAY) PayPal unit. He had no credentials in search or online content, nor in display ad sales. Some of the skepticism went away when he fired 2,000 people. But former Yahoo! CEOs had done the same. Thompson said he would go beyond the layoffs and close or sell the portal firm’s weak units and drive e-commerce revenue higher. He appeared tough enough to patiently get deals to sell Yahoo!’s multibillion-dollar stakes in Alibaba and Yahoo! Japan. He would not rush. Better to wait out the two Asian companies until they would set bargains that favor Yahoo!
Yesterday, a dissident investor, Third Point, which owns 8.1% of Yahoo!’s shares, showed that Thompson had overstated his past education. Thompson claimed he had a degree in computer science, according to his bio. If fact, he does not. To make matters worse, the head of the committee that found the new CEO, had “lied” about her resume, too. Patti Hart’s claims about her degrees were exaggerated, Third Point said.
The Yahoo! board says it will look into the lapse, or lie, by Thompson. Maybe it will cost him his job. Maybe Hart will have to leave as well. It is hard to see how Third Point gains leverage in the process, though. It still will own 8.1%. The board still will have the power to find a new CEO, and will have to do so immediately. Third Point may try to rally investors to throw out the board. Past experience shows that is hard to do, at least quickly. But Third Point could push Yahoo! back into disarray. The investment firm’s plans will have backfired.
The next step in the public humiliation of Thompson, some of which he probably deserves, is that the board will examine all the claims he has made about his background. There may be one or two more “mistakes.” Thompson will not be able to survive that. Yahoo! will look for what will be its fourth CEO in five years.
Thompson went from being poorly qualified to run Yahoo! to perhaps the one CEO in recent history who had intelligent plans to turn the portal company around and to one more person who gilded his resume. Goat, to hero, to goat. And all in just a few weeks.
Douglas A. McIntyre