Did Yahoo! Finally Find its Corporate Savior in Mayer?

Reeling from a slew of personnel setbacks and fierce competition, many on Wall Street and Silicon Valley have left Yahoo! (NASDAQ:YHOO) for all but dead in recent quarters.

But the embattled company appears to have hit a home run this week by luring Google’s (NASDAQ:GOOG) Marissa Mayer to become its third CEO in three years. The successful recruitment of a tech superstar like Mayer may be just enough to make people believe a turnaround at Yahoo! is now actually a real possibility.

“If ever there was someone who could be a corporate savior, it is Marissa,”said Jeffrey Cohn, who advises boards on CEO succession issues. “She’s an absolute coup for the Yahoo! board. She brings cool back to Yahoo!”

This week’s hiring of Mayer, 37, has largely been applauded by observers, some of whom believe her star power and inside knowledge of how Google works could be exactly what struggling Yahoo! needs to right the ship.

A Company in Decline

Hurt by competition in the advertising world from Facebook (NASDAQ:FB) and Google, Yahoo! is seen as a relic of the first generation of the Internet industry.

“A lot of people were banking on [Yahoo!] to continue to decline and potentially become a takeover target or just sort of disappearing,” said Cohn, author of Why Are We Bad at Picking Good Leaders?

Yahoo!’s shares have retreated by 41% over the past five years, compared with a 9% gain for Google and 7.4% rise for the Nasdaq Composite. Its market cap of $19 billion is dwarfed by Google’s $187 billion and even Facebook’s (NASDAQ:FB) $60 billion. Last year Yahoo! generated $4.98 billion in revenue, down 21.2% from 2010.

By surprising Silicon Valley and selecting Mayer, Yahoo! passed over a number of qualified candidates, including acting CEO Ross Levinsohn and Hulu CEO Jason Kilar.

A Jolt of Confidence?

“She'll go a long way towards creating a belief that Yahoo! can be turned around,” Rob Enderle, technology analyst at the Enderle Group, wrote in a note. “This belief/perception will be critical to this effort, because if folks don't believe it can't happen.”

The perception factor could come into play by instilling a sense of confidence in Yahoo!’s demoralized workforce while simultaneously significantly boosting its recruiting efforts.

Cohn said Mayer’s leadership skills and deep rolodex should “enable her to be a magnet for other star developers and software engineers around Silicon Valley.”

Evolution to a Content Provider

At the same time, Mayer proved at Google she has an ability to weed through scores of different products to find the winners. She led a series of successful product launches, including Gmail and Google News.

Those instincts could be crucial at Yahoo!, which has reluctantly evolved away from its technology roots in favor of content.

“Yahoo! has a great brand and a huge number of users,” said Kay. “It’s actually quite a valuable property.”

Yet Yahoo!’s antiquated and messy portal setup may be preventing the company from realizing its full potential.

Mayer “had a good eye to see what fit in the Google ecosystem and what didn’t. She’s a woman who knows how to say no to things that just don’t make sense,” said Cohn.

To be sure, Mayer is being handed a tough situation at Yahoo! with few easy solutions. Even with Mayer on board the odds may still be stacked against the company making a credible comeback.

“I don’t think there are any real silver bullets here,” said Kay. “It’s not like she’s smarter than the previous four or five [CEOs]. But she’s fresh to the problem, has very good connections and may have enough perspective to carry it forward.”

Cohn said “the notion of corporate saviors is extremely exaggerated in most situations.” Still, he said, “if anyone could do it, it’s Marissa.”

End of the Carousel?

Yahoo! shareholders are hoping Mayer can at least provide stability in the C-Suite, which has gone through enormous changes in recent years due in part to questionable hires by the board.

The CEO carousel at Yahoo! began in 2009 when co-founder Jerry Yang left, handing the keys to former Autodesk (NASDAQ:ADSK) CEO Carol Bartz, who was canned in 2011 after failing to hit key financial goals.

Bartz’s replacement, former PayPal CEO Scott Thompson, was ousted in May after lying about his academic credentials, leaving the company without a full-time CEO at a particularly precarious time.

“The board didn’t have a clear strategy” about what kind of company Yahoo! wants to be or “the leader who can get them there,” said Cohn. “In one fell swoop I feel that the board has gotten its arms around both of these issues.”

For Mayer, the move to Yahoo! allows her to enter the upper echelon of corporate leaders in Silicon Valley.

Enderle predicted Mayer would have been a “better” CEO at Google than co-founder Larry Page, who took over for Eric Schmidt in 2011.

“It was pretty clear she wasn’t getting a shot at a higher job there,” said Kay. “The move to a troubled Yahoo! suddenly breaks her free. From her point of view as a career move it’s fantastic. It’s a mutually beneficial relationship.”