Will Yahoo Turn To Google If Microsoft Search Alliance Fails?

Spinning-Top-AOn Marissa Mayer's CEO watch, will Yahoo remain in the Microsoft search alliance? Yahoo and Microsoft both released earnings this week. During the Sunnyvale, Calif. company's Tuesday earnings call, executives said the revenue per search (RPS) gained from Microsoft remains below the agreement's guarantee, which insiders note expires in Q1 2013.

Microsoft also reported earnings this week. During the earnings call on Thursday, Microsoft CFO Peter Klein said the Redmond, Wash. company has been encouraged with the year-over-year improvements. "To be honest, one hundred percent of our focus right now is on making sure we continue to drive those gains, which will benefit both parties of the partnership and make sure that's successful for both companies because it’s obviously very strategic for both of us," he said.

But will the Yahoo-Microsoft agreement last? Trip Chowdhry, managing director of equity research at Global Equities Research, said Yahoo should give Microsoft three to six months to increase the RPS or dissolve the partnership. "Microsoft has failed to deliver on RPS," he said, suggesting the partnership might not be renewed. "They may have no other choice but to form an alliance with Google."

Yahoo's success should focus on what's good for Yahoo and not for Microsoft, Chowdhry said. Today, Yahoo is in a much worse position, he said, adding that Mayer's compensation package should have been tied to performance.

The board should tie 50% of Mayer's compensation to revenue growth, 20% to expansion, 20% to improving stock price, and 10% on employee hirers.

At 37, Mayer is the youngest CEO on the Fortune 500 list. If she succeeds, Mayer will have completed the most successful corporate turnaround in years.  

Chowdhry named Larry Page, Sergey Brin, Larry Ellison, Steve Jobs and Marc Benioff as the only past and present CEOs passionate enough to make sure companies survive, thrive and prosper.

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