New Leader of Yahoo Ready for a Long Campaign Against Google

Jun 20, 10:39 AM

Current Headlines: Jerry Yang, who started Yahoo as a Stanford University student 12 years ago and has returned as chief executive after a six-year absence, said Tuesday that he was gearing up for a long fight with Google. "I'm ready to dig in and make sure we can take Yahoo to the next level," said Yang, 38. "I'm absolutely not interim. We want someone for the long haul."

Yang replaced Terry Semel, the former Warner Bros. executive, who presided as Yahoo lost its lead in Internet advertising to Google and as shares fell 35 percent last year.

Yang said he would hire engineers and improve the company's technology to regain ground. "We have some clear challenges," Yang said.

His remarks raised concern among investors that Yahoo, based in Sunnyvale, California, would increase spending when it may not have the resources. If Yang stumbles, investors fear the company may fall further behind Google.

"They need to identify a technology game plan," said Anthony Valencia, an analyst at TCW Group in Los Angeles. "They're definitely at a financial disadvantage to Google. In a spending contest, Google will win."

Google has the momentum. It has twice Yahoo's sales and handled 48 percent of U.S. search queries last quarter, compared with Yahoo's 28 percent, according to comScore, a research group in Reston, Virginia.

Google's sales reached $3.66 billion in the first quarter, with net income of $1 billion. Yahoo's revenue totaled $1.67 billion, with profit at $142.4 million.

"Jerry Yang is obviously very motivated, he's obviously not stupid," said Morris Mark, of Mark Asset Management in New York. "Can he run it? Jeez, I don't know."

The decision Monday followed 18 months of turmoil for Yahoo, as the company disappointed both Wall Street and many in its own ranks.

One of the original Internet success stories, Yahoo also faces rising pressure from a crop of young rivals like MySpace and Facebook. In a December shake-up, Semel sought to reinvigorate the company, but that, like much that he had tried, has proved insufficient so far.

Last week, disgruntled investors called for a management overhaul at the shareholders' meeting, and a third of investors casting ballots voted against re-electing one or more directors. Those moves intensified the pressure on Yahoo's board for drastic changes.

Some analysts maintain that the shake-up may be only a prelude to a more substantial corporate overhaul, which could include a merger or a sale.

"This had to happen or things would have gotten nasty in a hurry, with people taking positions and pushing for change," said Paul Kedrosky, executive director of the William J. von Liebig Center for Entrepreneurism and Technology Advancement at the University of California, San Diego. "I'm not convinced it's enough, but it had to happen."

Yang and Semel said they had been considering the changes after Semel notified the board that he wanted to step down sooner rather than later. "I saw myself much more as a coach than a player going forward," Semel said .

As president, Yahoo tapped Susan Decker, 44, a top executive long seen as heir apparent in the job to Semel. But the company was not ready to give her the chief executive's title. Yang is also filling the shoes of another senior executive who resigned this month, Farzad Nazem, the chief technology officer and one of the longest- serving Yahoo executives.

Current and former colleagues say Decker is widely respected, despite lacking extensive experience in operations and technology.

Semel was brought to Yahoo to impose discipline at a company shaken by the frenzy of the Internet bubble and the aftermath of its implosion. He did that, applying methodical management and hiring experienced executives.

"Yahoo had grown like a wild weed, but it needed to be trimmed and focused," said Christopher Lien, chief executive of Marin Software, which makes technology products for search advertisers. "He rationalized the portfolio."

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