Former Yahoo executive pooh-poohs idea of AOL deal

A former president and chief financial officer of Yahoo said a merger with AOL would make little sense.

"We've all looked at that deal so many times," said Sue Decker, who left Yahoo in 2009. "And I think you just get something that's even bigger, growing slower"—a line that generated chuckles around a roomful of female executives who had gathered in Dana Point, Calif., for the Fortune Most Powerful Women's conference.

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Decker's comments on Monday came days after an activist hedge fund, Starboard Value, urged Yahoo to consider a pairing with AOL, cut bloat, and sell Asian assets. Yahoo CEO Marissa Mayer responded by saying she would review Starboard's letter, but Yahoo executives said as recently as July that they would not consider an AOL deal.

Yahoo did not immediately respond to a CNBC email sent Tuesday seeking comment.

Tim Armstrong, CEO of AOL and Marissa Mayer, CEO of Yahoo Inc.
Scott Eells (L) | David Paul Morris (R) | Getty Images
Tim Armstrong, CEO of AOL and Marissa Mayer, CEO of Yahoo Inc.

Meanwhile, a crucial question hangs over Yahoo: What should it do with the roughly $5 billion it will receive in cash for selling a portion of its Alibaba Group holdings?

So far, Yahoo has said it will return at least some of the money to shareholders, and Mayer is in talks about a likely investment with the messaging-service start-up Snapchat, a move that would be the latest in a string of Yahoo deals with smaller companies.

Decker, a onetime Wall Street analyst who joined Yahoo in 2000 and now serves on several corporate boards, including Berkshire Hathaway, suggested that her former employer would be best served by returning to its core competencies: content about topics such as sports, finance and general news.

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"If they could get deeper in the things they're really great in, and shed other things," she said, "I'd like to see that." Yahoo has long struggled with botched attempts to expand by reaching beyond its basic strengths, Decker added, and the company had suffered for it.

"To get identity is going to be critical," Decker said.

In other remarks at the Fortune gathering, Mylan CEO Heather Bresch was somewhat dubious about the role of activist hedge funds in reforming companies in general.

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Bresch said hedge funds seem to quickly flip in and out of stock holdings.

"It used to be about building value. Now it's about trading value," she said. "If they hold your stock for five minutes, that's more than their algorithms will let them."