Yahoo faces big changes after Carol Bartz is ousted

Speculators are betting on big changes at Yahoo, one of the internet's pioneering content companies and still one of the most popular sites on the web, after the company fired its chief executive and launched a strategic review.

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Peter Chernin, Rupert Murdoch's former deputy at News Corp, was revealed to have proposed leading a takeover of Yahoo, and the company is expected to appoint investment banks quickly to examine its future structure.

The developments came after Yahoo's board ousted chief executive Carol Bartz, after a stormy tenure of less than three years, during which time the company's share price has stagnated and users have dramatically reduced the amount of time they spend on Yahoo's websites.

Yahoo shares leapt more than 6 per cent in the early hours of trading in New York yesterday, meaning Ms Bartz's departure had added $1bn of value to the company.

Having previously resolved to wait until the end of this year to evaluate her tenure, the company's board instead decided at a meeting on Tuesday that new management would be needed immediately to generate new ideas for the future. Roy Bostock, the chairman, telephoned Ms Bartz, who was travelling.

"I am very sad to tell you that I've just been fired over the phone by Yahoo's chairman of the board," she wrote in a bitter email to the 13,000-plus workforce. Ms Bartz's departure frees up Yahoo to examine major strategic moves, including breaking up the company, making large acquisitions or even selling it – if a buyer exists that can pay more than the current market value of $17bn (£10.5bn). Tim Morse, previously chief financial officer, was appointed interim chief executive, with support from a new "executive leadership council" of five senior managers. The company said it will search inside and outside its ranks for a permanent replacement.

Rory Maher, technology sector analyst at Hudson Square Research, said that the lowly valuation on Yahoo shares might make the company an attractive target for private equity, if a buyer could install a visionary chief executive with experience building products for the web. But the task is not easy.

"Yahoo is a big ship to turn around, and people forget what Carol Bartz has done there. She changed the silo structure, sunsetted a lot of unprofitable businesses and basically did a lot of the dirty work," Mr Maher said.

"And it is still going to be a difficult go generating the growth that a lot of peers are generating. Their main task is to either build or buy new products that can increase their market share in the fast-growing areas of social media, video and mobile."

It is unclear whether the management shake-up will disrupt Yahoo's bidding for the internet television site Hulu, which has been put up for sale by the TV networks that currently own it. Yahoo is believed to have bid between $1.5bn and $2bn for the company, which is also being courted by Amazon, DirectTV and Google. A new chief executive will also have to repair relations with Alibaba, the Chinese e-commerce site of which Yahoo owns 39 per cent.