Yahoo's Chief Steps Down

Co-Founder Takes Helm in Shake-Up

Yahoo CEO Terry Semel delivers a speech in this file photo, Friday, Jan. 6, 2006 at the International Consumer Electronics Show, CES, in Las Vegas. Semel ended his six-year stint as chief executive officer Monday, June 18, 2007, and will hand over the reins to co-founder Jerry Yang in the Internet icon's latest attempt to regain investor confidence. Semel, 64, will remain chairmain in a non-executive role. (AP Photo/Damian Dovarganes) (Damian Dovarganes - AP)

Yahoo's chief executive Terry S. Semel resigned yesterday as part of a management shuffle designed to reverse flagging fortunes as the company continues to lose ground to rival Google.

Semel, 64, who led Yahoo for six years and helped revive the company after the Internet bubble burst, will retain the title of non-executive chairman and remain in an advisory role while Jerry Yang, Yahoo's co-founder, takes over as chief executive. As part of the shake-up, Susan Decker, an executive vice president who headed Yahoo's advertiser and publisher group, becomes president.

In December, Semel launched a corporate reorganization that senior executives said yesterday had helped Yahoo refocus its efforts, cut bureaucracy and streamline its operations. But the results of those efforts have yet to translate into significant improvements in revenue or profitability, prompting unhappiness in shareholders and employees.

At an annual shareholders' meeting last week, some investors complained the company's top executives were overpaid and called for executive pay to be tied more closely to performance. That proposal failed to gain a majority.

"We all know they've been struggling to find themselves in terms of strategic direction," said Charlene Li, an analyst with Forrester Research. Yahoo took several steps in recent months to reposition itself in the market, she said. "The final step was to say who is going to lead the turnaround. It's clear it wasn't going to be Terry."

In April, Yahoo reported that its first-quarter profit declined 11 percent compared with the corresponding quarter a year earlier, disappointing analysts who had hoped to see better results from the company's new advertising program, Panama. Yahoo has also seen its share of the crucial Internet search market decline as Google pulls farther ahead of its competitors.

Semel said during a conference call with analysts and reporters yesterday that he had been talking to the Yahoo board about resigning for "quite some time" and decided those talks had gone on long enough. "I saw myself more as a coach than a player moving forward," he said.

Yang, 38, described this as an "emotional time for us at Yahoo."

"Yahoo is in the midst of a multi-year transition," Yang said. "It's imperative to execute with clarity, speed and discipline."

While he admitted the company must be more responsive to the dramatic changes reshaping the Internet economy, he and other senior executives expressed confidence in its global reach and workforce.

Yahoo executives tried to assure analysts that the management changes did not result from a sudden deterioration of the company's finances. They said Panama, which is the company's program for selling online advertising linked to search engine results, was already outperforming Yahoo's expectations. But the executives said revenue from online advertising was not faring as well because of a slowdown in earnings from graphical advertising.

As president, Decker, 44, will continue to oversee Yahoo's advertising efforts. In the past year, she directed the company's alliance with newspaper publishers, building a network to share online advertising and some content. That collaboration includes at least 264 U.S. newspapers.

Before joining Yahoo, Semel spent two decades at Warner Brothers, and some critics questioned whether he fully grasped the dynamics of the Internet economy. Jeff Jarvis, a professor at City University of New York, said Yahoo under Semel had mistakenly assumed that the Internet was a medium like television rather than a tool, as Google had discovered.

"I argue that Yahoo is the last old-media company," Jarvis said. "They operate by the old-media model: We control the content, and we spend a lot of money advertising that content, and then we'll shove ads down your eyes as long as we can."

Under Semel's stewardship, Yahoo increased its revenue ninefold and more than tripled the number of employees to 12,000.

Staff writer Frank Ahrens and researcher Rena Kirsch contributed to this report.