WHEN: Today, Wednesday, May 27th

WHERE: CNBC's "The Kudlow Report"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Carol Bartz, Yahoo! CEO, tonight on CNBC's "The Kudlow Report." Excerpts from the interview will air tomorrow throughout business day programming.

All references must be sourced to CNBC.


CAROL BARTZ: Well my friends know I am somewhat erratic and love a challenge, love a challenge and all I have to tell them is listen the way I look at it Yahoo is the biggest asset on the Internet and way misunderstood. And wow what an opportunity, we get it and besides, I have a terrible golf game

JIM GOLDMAN: Was it the challenge that drew you to the job or what you were reading in the press at the time? How did you get your arms around the idea that this is something that you wanted to take on?

CAROL BARTZ: When Jerry first approached me I said oh my god no. I'm not even the right person. Go find someone, I don't know in Time Warner or someplace. And I really didn't pay any attention, but I met with Jerry one evening and I said show me what the org chart looks like. Show me who would make this decision everybody wants to know about Microsoft and by the time he had finished I was pretty hooked because I thought, oh my god this is this is a management job. This is a job just to help a company unlock its value and oh boy. Oh boy. I love that kind. I love complexity. I love problem solving. I love strategy and I actually like managing people because its such a kick.

JIM GOLDMAN: You made a reference to this earlier today -- that org chart, while it may have been intriguing to someone like you, most other execs would look at it and say are you kidding me?

CAROL BARTZ: I did say that. I said Jerry this org wont work it doesn't function. I can see that -- you cant, it wont function this way. So um but I just saw it as wow I know what to do. It wasn't, ok fine I have a computer science degree and all that. It wasn't I was coming in as the big advertising guru expert but I know how how to run a company and it was very clear that this company needed a little untangling and and we had a great brand. You know literally when you can reach 76 percent of the US audience, which is what yahoo does every month -- 76 percent of the US audience on the Internet that's a big deal. And so make that even better and stronger and more appealing, why not?

JIM GOLDMAN: You've had some time now to see how this company is run. To institute some changes I think for those of us who cover the company we expected some sort of a honeymoon period. Carol Bartz comes in she's an organizational whiz kid she knows what she's doing lets see what happens. And yet here you are this amount of time later and people are still enamored, maybe you know this maybe you don't, still enamored with your leadership qualities. You seem surprised?

CAROL BARTZ: Well one thing I didn't count on was the amount of attention. I must have had 3 feet of proposals on my desk in the first 2 weeks on how I can help you fix yahoo and I thought well thank you very much but I took the job. Ah and so I didn't quite count on that but frankly the excitement that the employees are exuding and frankly the excitement of the market ah is very fulfilling for us. So I didn't you know I didnt quite know um how it would run but its actually been way above my expectations.

JIM GOLDMAN: Let's talk about the market for just a second because this leads me to my next ah topics of conversation if you will because it seems Yahoos shares only jump when Steve Ballmer, the CEO of Microsoft, opens his mouth and says yeah we are still interested in Yahoo search. Or yea we are still interested in a deal. Or yea, I took a phone call from Carol Bartz today. Or yea we are still talking and instantly...

CAROL BARTZ: luckily he does that a lot were actually in pretty good shape with the markets so

JIM GOLDMAN: well lets talk about the status of Microsoft first are you guys talking?

CAROL BARTZ: Well when I got in here after you know 2 seconds the first question asked in the press conference was what are you going to do about the Microsoft search deal? And I'm like I don't even know what it is. So you know let me spend some time understanding that's my job its my job to talk to people and its very clear it was very clear from the beginning -- that search is an amazing asset of the company and frankly an asset that both the people that come to Yahoo sites use as well as obviously the advertisers cause its a good targeting method. Um it was also obvious that like any good CEO that if somebody pays you a boatload of money and gives you great technology and access to what you need the right information so forth that that would make sense. So any deal is based on those kinds of situations does it strategically fit do you make enough money on it and does it still serve your customers so given the right deal sure we'd do it.

JIM GOLDMAN: But I think a lot of people might be surprised that this has been going on for years and it seems like this on a daily basis there is speculation are they or aren't they will they wont they ...why hasn't a deal coagulated yet? What's the problem?

CAROL BARTZ: You have to understand how deals work you get an offer and then you decide to accept an offer -- but you have to start with that offer part and that's not the part that we have.

JIM GOLDMAN: Is that surprising to you?

CAROL BARTZ: I'm running a business every day in and out this is not the main thing I pay attention to I pay attention to having Yahoo be a great place and this.. everybody thinks this is my overwhelming job. When I came here this is not my job my job is to continue to make this co great and that's what I focus on.

JIM GOLDMAN: Focus as far as speculation in the media is concerned, the pundits following the company. Um its a search deal and a search deal only if a deal of any kind is to happen is yahoo the entire company for sale?

CAROL BARTZ: The entire company -- any public company -- is for sale for the right deal. That's -- any CEO has to give you that answer. Are we marketing the company oh of course not? Again I mean this is this is a wildly successful company so there's no reason to think of yahoo as anything but that. By the way that's our job to have our investors feel that way and our customers who by the way do they are not wrapped up in this whole situation that tends to be more silicon valley press and that sort of thing

JIM GOLDMAN: And the last question on this front is um the likelihood of any kind of arrangement or partnership with Microsoft give me percentages carol.

CAROL BARTZ: I you know what I wont do that. Now it's ah its sort of zero to zero. So you know and until it isn't that's what it is

JIM GOLDMAN: When you look at yahoo as a company looking forward you have made some pretty specific changes the organization has seen a dramatic change in a very short period of time. for you the biggest single priority right now to unlock the value of yahoo. Is it technologically is it marketing how do you convince users or do you need to how do you convince advertisers or do you need to how do you convince wall street or do you need to that this is a company not nearly embarking on a turnaround but well involved in an existing turnaround and we are already seeing the fruits of that success.

CAROL BARTZ: Ok I am going to take you on here. There is no turnaround at yahoo. Yahoo is only down 13 percent year over year. Far less than most people in the advertising business far less you know if you look at a lot of advertising related companies they are down 30 to 40 percent. In this market down 15 is the new flat. So we are doing very well. There is not a turnaround there is a mental turnaround. Frankly, for you guys but there's not a turnaround involved in this company this is really about continuing to grow and continuing to get our reach. We've got the number one finance site, news site, sports site number one mail by two x in the world you know our messenger is big answers we are number one so you know all this business of turnaround is just crazy.

JIM GOLDMAN: We've seen deals this week digital sky and facebook. Valuing face book at 10 billion dollars. I know Steve Ballmer and Microsoft have to be pretty thrilled with that valuation. We are seeing crazy numbers thrown about surrounding twitter a half billion maybe 750 million dollars is there any talk that yahoo will stop trying to grow organically and embark on an acquisition of that significance where you could see a you know focused on whether Microsoft is going to go out and buy yahoo or parts of it what about yahoo taking on the aggressive stance and going out and buying your own stuff?

CAROL BARTZ: Well first of all Yahoos done that. I mean if you we are the number one photo site flickr is the number one photo site in fact it grew it doubled from 44 million to 84 almost doubled last year. Um we have a lot of growth in these areas you know the interesting thing is we social we need social to be a part of all of our properties. Its not just a gathering for let me change pictures and whatever but what commentary would you have on the financial pages, and what commentary would you have on sports -- so the fantasy sports people can communicate better, so the whole idea of how communities come together has to be better integrated its not just a place on the internet like facebook its an integration concept and that's what Yahoo does best. So were not out of this game this is crazy like someone said oh you missed video. What do you mean we missed video? Video is just beginning. You know the whole idea of video snacks to impart information its just beginning.

JIM GOLDMAN: You are trying to compete with Google. Looking at your earnings come out days apart. And you want to talk about a tale of 2 companies it seems that goog continues to be this license to print money although they are slowing as far as growth is concerned you look at the cash this company generates. I don't know if you look over their p and l when it is released or even if you care but you gotta see these headlines the numbers are extraordinary. Is too much made of the competition between Google and yahoo in other words is Google is yahoo satisfied with picking up the parts of the market that Google either is..

CAROL BARTZ: Excuse me...we aren't picking anything up. We we are the market. We are in. We are very very good in um providing people with the information and content they need. We are not a search company. It is no different than any software company competing against msft and saying I mean just because we are software doesn't mean we are os. Just just cause we are on the Internet does not mean that we are a search company. We are much broader than a search company. We are positioned totally different so this sort of drafting that happened behind Google is nonsense. They are making a lot of money good for them. Were making a lot of money good for us. Were serving entirely different needs. You don't go to Google to find out what's happening in the financial world. You don't go to Google ah to connect up with groups that you are interested in. You don't go to Google um you know to get the headline news on the moment. That's not what happens there. So we are very different and we are just as special as they are.

JIM GOLDMAN: Last question for you. Looking at where you're at right now versus when you came into the company -- on schedule, ahead of schedule, behind schedule, as far as the things that you set out to accomplish as ceo?

CAROL BARTZ: Well one of the things that I am fond of saying lately is I cant make a baby with nine women in a month... um so I actually know what id like to do I get the concept but there's just something's take some time. So ah it isn't that any of this is really hard its just ah step one and then step two and step three. But you know first of all I want to say the morale in the company is great, ah ill match morale with anybody any industry any company. We are so excited because we are moving forward and its so its behind schedule and on schedule.

JIM GOLDMAN: Carol Bartz just call her the straight talking ceo of yahoo.

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