As Carl Icahn Buys More Yahoo Shares, Is It the Sign That a CEO Choice Is Near?

When everyone else has been selling, it seems Carl Icahn has decided to throw good money after bad–as in nearly $1 billion bad–by buying almost seven million more Yahoo shares, according to a regulatory filing.

Why is he doing it? BoomTown is guessing that the billionaire investor thinks he can recoup some of his massive losses in Yahoo, as Jerry Yang prepares to step down, and the board, on which Icahn sits, names a new leader.

That’s why my guess is that the choice of a new CEO is likely to be sooner than later and much more Icahn-friendly.

That could point more clearly to perhaps one of two execs whom Icahn brought with him to the Yahoo (YHOO) board–either former media exec Frank Biondi Jr. or, more likely, former Nextel exec John Chapple.

Another theory is that Yahoo will pick a more low-key, tech-oriented outsider, an operational star who can get things turned around at Yahoo without a lot of fuss, similar to choices made for eBay (EBAY) in its pick of John Donahoe, and Mark Hurd at Hewlett-Packard (HPQ) recently.

One of the names being bandied about in that regard is HP exec Todd Bradley (pictured here).

Bradley is in charge of its massive Personal Systems group, a $28 billion annual business, which includes personal computers, mobile devices, technical workstations, digital televisions, personal storage solutions and Internet services.

Interestingly, another top HP exec, Vyomesh (VJ) Yoshi, who runs its Imaging and Printing group, is currently a director on the Yahoo board.

In any case, the purchase of 6.7 million more Yahoo shares for about $65 million by Icahn over the last several days is definitely a move to watch.

Icahn, who waged a proxy fight against the Internet giant, owns stock that has lost about $900 million in value since he bought about five percent of Yahoo earlier in the year.

That loss comes from his purchase of about 70 million shares in the spring, at about $25 a share, of Yahoo stock, right in the midst of its takeover battle with Microsoft.

Yahoo shares closed Friday at $10.58, up 33 cents.

With the new purchase, Icahn now owns about 5.4 percent of Yahoo, which–combined with three board seats–gives him a lot more clout over decision-making and in forcing the current board to make a CEO pick who will be more interested in doing some sort of deal with Microsoft (MSFT) quickly.

Icahn has long agitated for Yahoo to sell all or part of itself off to the software giant, a move that has been resisted by Yahoo leadership. Instead, Yang tried to pull off a deal with Google (GOOG), which failed.

But that leadership is about to change, as the board searches for a new CEO to replace Yang, who said he was ready to step down a few weeks ago.

Lots of names have been floated for the job–from News Corp. (NWS) COO Peter Chernin to DoubleClick head David Rosenblatt to Google exec Tim Armstrong, as well as former Yahoo COO Dan Rosensweig.

Most sources inside and outside the company do not expect its current president, Sue Decker, who is also up for the job, to be selected.

But many point to a current Yahoo board member as a quick choice, in order to get some key initiatives moving, such as a Microsoft deal or a merger with Time Warner (TWX) online unit, AOL.

That points to someone like Chapple (pictured here), who has been querying a range of midlevel Yahoo execs of late, presumably to get a lay of the land at the company for the board.

He or perhaps even board member Maggie Wilderotter could be picked as an interim CEO, in order to signal to investors that true change is on the way at Yahoo.

Whoever is chosen needs to move quickly said many I spoke to about the Yahoo CEO job.

Wrote one experienced Internet exec in an email to me, reflecting a very common sentiment:

“Whoever comes in is going to have one shot to define the product to the consumer in a way that differentiates it from the rest of the market and provides unique value. Their brand is fuzzy right now. And they’ll have to find a uniqueness in their ad sales so they are not relegated to being the also-ran.”

Well, with all the money riding on it, Carl Icahn certainly has to hope that does not become the case.