Terry Semel Out As Yahoo CEO, Replaced By Jerry Yang

Jun 18, 08:05 PM

Current Headlines: By Elise Ackerman, Ryan Blitstein and Troy Wolverton, San Jose Mercury News, Calif.

Jun. 18--Yahoo Inc. announced this afternoon that it has replaced Chief Executive Terry Semel with co-founder Jerry Yang, a week after shareholders expressed strong dissatisfaction with Semel's perfomance and pay.

The company said Semel would continue to serve as chairman of the board, in a non-executive advisory role, and Susan Decker, an executive vice president and former chief financial officer, would become president.

In a statement, Yang said he was "delighted to assume this leadership role at the company David Filo and I started 12 years ago."

Shareholders attending Yahoo's annual meeting protested Semel's $71.7 million compensation package in a symbolic vote against three members of the board of directors who made up the compensation committee.

About one in three shareholders voted not to re-elect Roy Bostock, Ron Burkle and Arthur Kern.

"I am excited for the company," said Eric Jackson, a shareholder who sparred verbally with Semel at the meeting. "I think Jerry Yang and Sue Decker are very capable, and they will bring a lot of energy and passion to their new, enhanced jobs and will ultimately do a great job at leading the company."

While Semel oversaw a turnaround following the dot-com collapse of 2000, he has been under fire in recent years as Yahoo has lost ground to Google.

The value of the company has fallen by nearly 30 percent since 2005, as the delay of a new advertising software and a steady exodus of talent prompted concern that the company had lost its competitive edge.

In a statement, Semel said he told the company's board "of my desire to take a step back sooner rather than later."

"I believe Jerry and Sue, with their superb talents and intense dedication to Yahoo! and its people, are the perfect combination to carry us forward," he said. "This is the time for new executive leadership."

Although Yang has never been chief executive of Yahoo, he has been part of the management team since co-creating the site with David Filo in 1994. Jackson, who represents a group of hundreds of Yahoo shareholders, including current and former employees, said the founders have a lot of support within the rank and file.

"The technology world is filled with examples of company founders that have grown into the job," Jackson said. "One of the reasons why is they know the business better than anyone on the outside, and the best grow into their roles."

But some analysts were skeptical that the management change would solve Yahoo's problems.

While Semel was a lightning rod for criticism of the company, Yang deserved some of that scrutiny, said Trip Chowdhry, a financial analyst with Global Equities Research in Half Moon Bay. As an executive officer at Yahoo since its founding and its second-largest individual shareholder, Yang had the opportunity in recent years to help steer Yahoo in the right direction. But it appears that he didn't take action until shareholders raised a fuss about Semmel's outsized salary, Chowdhry said.

"That's a big question mark about his (leadership) abilities," said Chowdry, whose firm does not do any investment banking. "It very much tells us that Yahoo management has been sleeping for last three years, including Jerry Yang."

Yang likely understands technology much better than Semel, whose background was in Hollywood, say analysts. That's a good thing, because many of the problems Yahoo faces are technological ones; in the race to exploit new Internet technologies such as video or social networking, it has trailed behind not only arch-rival Google, but many Internet startups also, they say.

And the shakeup puts Yahoo management and employees on notice that things need to change in the company, that the status quo can't continue, analysts say.

Still, because Yang has had a major role throughout Semel's tenure, the move likely won't change Yahoo's outlook all that dramatically, said Todd Greenwald, an analyst with Nollenberger Capital Partners in San Francisco.

"It's not like Steve Jobs coming back to Apple or Michael Dell coming back to Dell," said Greenwald, whose firm has not done any investment banking with Yahoo. Moreover, he added, "All of the challenges they were dealing with yesterday, they're still dealing with ... They will not go away over the next three to six months just because Terry's gone."

But big changes could be coming further down the line, analysts say.

Last month, Yahoo named Blake Jorgensen, a former investment banker and co-founder of Thomas Weisel Partners, as its CFO. That Yahoo now has two top executives that have Wall Street experience and has named one of its co-founders and major shareholders as CEO signals that the company will soon look to streamline its operations, potentially shutting down or selling off different assets or business lines, said Chowdhry.

"The red tape has been removed," he said. "Yang will make selective bets. He will not hesitate to close down selective properties."

Semel is only the latest CEO to lose his job under fire from frustrated shareholders. In the past year, top executives at both Home Depot and Pfizer were shown the door when the companies' stock prices didn't match up with their bloated compensation packages.

"Clearly, shareholders are very concerned about the lack of correlation between pay and performance," said Robert McCormick, chief policy officer at Glass Lewis, a shareholder advisory firm in San Francisco. "Five years ago, they would've been reluctant to express these concerns. But there's a growing sentiment among shareholders that it's their responsibility to look at these things."

Contact Elise Ackerman at (408) 271-3774 or eackerman@mercurynews.com. Contact Ryan Blitstein at (408) 920-5715 or rblitstein@mercurynews.com. Contact Troy Wolverton at (408) 920-5021 or twolverton@mercurynews.com.

-----

To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

Copyright (c) 2007, San Jose Mercury News, Calif.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NASDAQ-NMS:YHOO, NASDAQ-NMS:GOOG, NASDAQ-NMS:TWPG, NYSE:HD,