Yahoo Chief Executive Terry Semel stepped down on Monday and handed the reins of the struggling search company to co-founder Jerry Yang after six years on the job.
Susan Decker, former chief financial officer and head of the advertiser group, has been named president. Semel, meanwhile, will assume the position of nonexecutive chairman and serve as an adviser to the management team and board of directors.
"This is the right thing to do for Yahoo and the right time to do it," Semel said in a conference call with analysts and media.
The shakeup comes nearly one week after a somewhat contentious shareholder meeting in which stockholders criticized Semel's pay in light of the company's lackluster stock price and failure to mount any serious challenge to Google on search and search advertising. Shareholders re-elected the board members with only 66 percent approval, which is low compared with the 80 or even 90 percent approval that is usual. In addition, 34 percent of shareholders voted in favor of a proposal to link Semel's pay with the financial performance of the company.
With the personnel changes, the company is undoing some of the reorganization it initiated six months ago in which it formed three business units: Technology, Audience and Advertising. Now, Decker will oversee Audience, which she previously headed up, and Advertising, whose head had not been named. The Technology group, which has been searching for a unit head since the departure of Chief Technology Officer Farzad Nazem several weeks ago, will report to Yang. Co-founder David Filo will oversee the technology organization until a replacement for Nazem is named.
"The past year has been a difficult one for Yahoo and none of us has been satisfied with the company's financial performance," Semel said in a statement. "As the board and I discussed my future goals and plans I was clear in telling them of my desire to take a step back from an executive role sooner rather than later. We therefore concluded that this is the time for new executive leadership to step in and drive the company to realize its full potential."
Yang and Decker will be an "unbeatable team," he said. Decker is a "strategic powerhouse" and a "financial wizard" and "one of the best business people around," Semel said.
Yang and Decker both sounded choked up in speaking about Semel. "It is an emotional time for us at Yahoo," Yang said. Semel "has not only been a strong leader, he's been a consummate partner…Terry has been a true role model and a mentor to me," he added. "I've learned how to become a better leader and a better person" because of Semel.
Yang credited Semel with re-focusing the company on key priorities after the dot-com bust and helping Yahoo increase its revenue nearly nine-fold to $6.4 billion last year, boosting operating income from a loss to nearly $1 billion and overseeing the number of users grow to more than 500 million and employees to nearly 12,000.
Decker called Semel a "true leader of leaders" and said Yang "really represents the heart and soul of Yahoo."
Yang said he was ready for the challenge of leading the company. "I know the business and market dynamics well," he said. "Yahoo is in the midst of a multi-year transformation…It's imperative that we execute with speed and clarity and discipline," Yang added.
Decker said that while the company's affiliate search business was running slower than expected and growth of its display advertising business had slowed, executives were pleased with early financial returns for the company's new paid search-marketing platform, Panama. "We expect year-over-year growth versus what we saw in Q1," she said. The company's second-quarter revenue will be at the mid-point to the low-end of its previous guidance of $1.2 billion to $1.3 billion, she added. The company reports its second-quarter results on July 17.
Eric Jackson, a shareholder who had told Semel during the shareholder meeting last week that he should apologize publicly for the company's lagging financial performance, said he was pleased with the management changes.
"I think that Semel was the right person at the time he came in in 2001. He did a lot of great things to stabilize the company and set it on its path after the bubble burst, but shareholders were looking for some new blood and direction," said Jackson, chief executive of consultancy Jackson Leadership Systems. "No question, the meeting and the voting results were weighing on the minds of the board and co-founders," he said.
Greg Sterling, principal of consultancy Sterling Market Intelligence, agreed. "I think the public speculation over Semel's fate and future had been getting louder and there was enough discontent at the shareholder meeting to show that that was only going to increase if Yahoo didn't deliver a very solid quarter and perhaps even out-perform," he said. "This may be a mature recognition on (Semel's) part that it is time for a leadership change."
However, Sterling said: "They still have real issues to solve. This takes the pressure off and the distraction around Semel, but now they've got to right the ship."
Yahoo lost its lead in the search market to the younger Google in recent years and watched as Google turned search advertising into a cash cow. Yahoo has only 27 percent share of the search market share compared to Google's nearly 50 percent. Yahoo's stock has dropped about 10 percent from a year ago, while Google's has jumped about 30 percent. Yahoo also took a hit on Wall Street after it reported that first-quarter net profit was down from a year earlier and failed to report any positive effect from Panama. However, the latest news sent Yahoo shares up nearly 3 percent in after-hours trade to $28.12.
Putting to rest any speculation that Yahoo is a takeover target, Semel said: "The board and I believe Yahoo is, and can be, a vibrant independent company."