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Yahoo Names Marissa Mayer CEO

After a rigorous search for 2 months, Yahoo! Inc. (YHOO) finally announced Marissa Mayer as its new chief executive officer and member of the board of directors effective July 17, 2012. Yahoo is hopeful that Mayer will be able to turn around its struggling Web portal with her wide experience in technology.

The 37-year old Mayer joins Yahoo from the world's most popular Internet search engine, Google Inc. (GOOG), where she was responsible for local and geographical products including Google Maps, Google Earth, Zagat, Street View and local search for desktop and mobile.

According to sources, Mayer’s name was not mentioned in Yahoo’s shortlist of CEO candidates after Scott Thompson had to resign due to his inflated academic credentials. Instead, it was becoming more likely that interim CEO Ross Levinsohn would step up to the permanent post. Hence, Mayer’s becoming the Yahoo chief was a surprise to many.

Mayer will now be Yahoo’s fifth chief executive in less than a year, including two interim CEOs.

Despite being one of the biggest brand names, Yahoo has performed very poorly in the last few years. We believe the job will be quite challenging as Yahoo has seen its fortunes decline in recent years with its continued leadership crisis and failure to recognize upcoming trends and user behaviors. The social networking sites of Facebook, Inc. (FB) and Google have also been persistently eating into Yahoo's market share.

Mayer said that she would focus on the Internet Company’s strong franchises, including e-mail, finance and sports. She also expects to do more with its video broadband and mobile businesses, increasing its user base.

Things haven’t been great at Yahoo and we are uncertain about whether Mayer can help Yahoo regain its former stature. Due to the continuous changes in the top most management, it has become difficult to understand the company's core strategy. Given Mayer’s background, one might expect Yahoo to increase focus on Web technology and products, while content takes a back seat.

To combat the crisis at Yahoo and engineer a turnaround in the business, Mayer will have to take some bold decisions, restoring Yahoo’s position as well as shareholders' confidence. We believe that Yahoo will be a wait-and-see story until Mayer’s new strategies bear fruit.

Yahoo shares carry a Zacks #2 Rank, implying a Buy rating for the near term (1–3 months).

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