Why Did Yahoo Hire an Investment Banker as CFO?

Yahoo (YHOO) named a new CFO this past week, which raises some interesting questions. Blake Jorgensen will assume the duties beginning in early June and report directly to Chief Executive Officer Terry Semel.

What is interesting is Jorgensen's background. He was a co-founder of San Francisco-based investment banking firm Thomas Weisel Partners. Why would Yahoo select the critical position of CFO from the investment banking world? It could signify that Yahoo is indeed for sale and an experienced investment banker knows exactly how to cross the T's and dot the I's and pretty up the baby for display.

The other possible reason to hire a CFO with an investment banking background is to establish solid and reliable communication with Wall Street. The analytical and portfolio management world love a CFO who communicates effectively surprises to the upside! With that appreciation, unforeseen events will tend to rock that stock less than if handled by a CFO the Street likes.

The CFO of any publicly traded company must effectively deliver the financial vision of his company. The CEO must deliver the business vision. A good CFO can compensate for a less-than-excellent CEO by managing the CEO internally within the company, and helping to absorb any body blows by the financial media.

Many investors have called for Semel's resignation because he hasn't delivered earnings to Wall Street's liking. Semel is indeed a visionary technologist, but is he an effective manager/CEO? The jury is still out. His communication skills with the Street have been inconsistent at best.

With a strong CFO, investors may take comfort that the news out of Yahoo will be smoothed out over the ensuing quarters.

We shall see, but remember, investment bankers are deal makers.

Comments

[Sr. Pessimist:]

Probably preparing to sell Yahoo to Microsoft.

2007 May 21 11:33 PM