Yahoo! Chief Quits Over Poor Results ; BUSINESS

Jun 19, 01:57 AM

Current Headlines: By Stephen Foley

Terry Semel has been replaced as chief executive of Yahoo! after rising shareholder discontent over his six-year stewardship of the internet pioneer.

In his place, the company has appointed one of its two founders, Jerry Yang, as its new, day-today boss, surprising Wall Street by passing over the long-standing No 2, Sue Decker.

Mr Semel's days have appeared numbered since Yahoo!'s annual shareholder meeting last week, when one -third of investors withheld their support for the re-election of some board members in a protest over his pay and when one angry investor bickered with him about how the company has given up its dominance of the internet to rival Google.

And it became clear last night that Yahoo! is also headed for a disappointing set of quarterly financial results, a fact which was likely to have been a final straw for the board.

Mr Semel will stay on as chairman, but in a non-executive role described by Yahoo! as "an advisor and important resource". The company was keen to point out last night that, because his departure was couched as a resignation and because he is staying on the board, Mr Semel will receive no severance package.

Yahoo! shares jumped 5 per cent in after-hours trading as the resignation was announced. Many of those immediate buyers were hoping that Mr Yang will find a way of closing the gap with Google over the medium term. Many more, though, were betting that the company may simply now put itself up for sale. Rumours yesterday suggested that Rupert Murdoch's News Corp, owner of the MySpace social networking web-site, may look at ways of acquiring Yahoo!, and earlier this year Microsoft held exploratory talks about a takeover.

"The shareholders certainly want management to explore all M& A options and it certainly looks like they are now going to have to do that," said Kim Caughey, ann analyst at Fort Pitt Capital. "Yahoo! had the eyeballs and mindshare, but it hadn't been able to monetise that as well as Google had, so this seems to be a logical outcome. Sadly, it's the management that takes the fall."

Yahoo! was one of the first big media companies to emerge on the internet, spanning social networking, entertainment and information, but while the company says half a billion people regularly access its site, it has failed to make as much money from those visitors than rivals such as Google.

It is less good at tailoring adverts to users' individual search queries, making them less profitable. A new technology aimed at fixing that, called Panama, was months late and - it became clear yesterday - is not immediately improving results. Ms Decker said earnings and operating cash-flows for the second quarter of the year would be between the middle and the bottom of analysts' forecasts.

In 2006, Mr Semel, Yahoo!'s chief executive, received a cash and shares package valued at between $72m ([pound]37m) and $107m, depending on how share options are measured. That made him one of the best-paid executives in America, despite Yahoo!'s lacklustre share price. When one-third of shareholders withheld their support for the re-election of members of the audit committee last week, it was one of this year's biggest revolts over executive pay.

At the shareholder meeting, Eric Jackson, who said he represented a group of current and former Yahoo! employees who own 2.1 million shares, said presentations by senior company officials failed to give specifics on how Yahoo! can jump-start growth. "I am surprised that you didn't apologise for the last three years of performance," Mr Jackson told Mr Semel.

The main players

TERRY SEMEL

One week ago, Terry Semel insisted to shareholders that he still had enough "fire in his belly" to lead Yahoo!. But it was-n't his fire they wanted to hear about, it was his firing. The 64-year-old New York native, spent 24 years at Warner Brothers, the film and television producer, before being poached by Yahoo! in 2001. "As we discussed my future goals and plans, I was clear in telling the board of my desire to take a step back sooner rather than later," he said yesterday.

JERRY YANG

Technically speaking, Jerry Yang is still on a leave of absence from his electrical engineering PhD at Stanford University. In 1995, he and David Filo took the time out to focus on Yahoo!, an internet directory that they had set up the previous year. Born in Taiwan in 1968, Mr Yang moved to the US with his widowed mother at the age of 10 and is now the country's 140th richest person, according to Forbes magazine.

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