Money Matters - Simplified

Yahoo! Chief Steps Down

Terry Semel has stepped down as chief executive of Yahoo and is being succeeded by Jerry Yang who was one of the co-founders of the company. Yang along with David Filo created the Yahoo! Internet navigational guide in April 1994, when the two were students at Stanford. Semel`s resignation was announced on Monday by Yahoo officials. However, he will remain on board as a non-executive chairman.

The decision comes after a long struggle by Yahoo! to regain its no.1 internet portal status with the entry of stalwarts like Google and even young rivals like MySpace and Facebook. Despite numerous efforts on behalf of Semel to rejuvenate the company, it has been disappointing on the Wall Street. Finally, discontented investors suggested a management overhaul at the Annual shareholder’s meeting last week.

With almost a third of the investors against re-election of one or more directors on the board, Semel had to step down in favour of Yang. Analysts feel that this is only the beginning and that it may be setting the background for a major corporate overhaul like a sale or a merger.

Yang, a Taiwanese raised in San Jose, California, was handling the post of Chief Yahoo! and had been filling the shoes for Farzad Nazem, the chief technology officer, who left earlier this month. Insiders had expected Susan Decker, current executive vice- president, to take over from Semel. The latter had been the disciplining factor at Yahoo after it saw sudden growth spurts. Not only did he bring methodology to the running of the company, but also in the management by ensuring that only the most experienced were hired.

“Yahoo had grown like a wild weed, but it needed to be trimmed and focused for search advertisers. He rationalized the portfolio”, said Christopher Lien, chief executive of Marin Software. What proved to be Semel`s biggest mistake was to ignore online advertising, which Google used scrupulously to emerge victorious in the race for biggest ‘search’ engine. After realizing that Google made huge profits by placing small text advertisements next to the search results, Semel too tried to make amends to his policy. But Google was too far ahead in the race to look back.

“It's not fair to say that Yahoo totally blew it. Yahoo did a fine job in search. It's just that Google did an amazing job. So in comparison, it doesn't look as good.” said Ellen Siminoff, chief executive of Efficient Frontier, a search advertising company. Siminoff is a former Yahoo employee.

In terms of social interaction, Semel tried to put yahoo ahead of its competition by purchasing photo-sharing site Flickr, but it could never catch up with social websites like MySpace and Facebook.

Employees, both current as well as former, of Yahoo are of the opinion that Yang is a makeshift CEO and will most likely hand over the reins to Decker, who seems better qualified for the job. However, Yang, 38, said on Monday, “I very much see the CEO role as something I plan to do for a while.”

Jordan Rohan, an analyst with RBC Capital Markets, feels that the management overhaul is just the beginning. “It wouldn't surprise me to see Yahoo join forces with MySpace or another large portal like an AOL.”