Yahoo Inc. on Monday tapped co-founder Jerry Yang to replace Chief Executive Terry Semel, bowing to investor pressure as the Internet media company has failed to keep up with rival Google Inc.
Semel will take the role of the board's nonexecutive chairman, and the company named Susan Decker, its former chief financial officer, as president. She will head up the advertising and media business operations.
Yahoo also warned that slower growth in display advertising this quarter would offset a better-than-expected performance from its recently upgraded search advertising business.
As a result, it expected second-quarter revenue to land in the lower half of its previously stated outlook which, excluding the cost of payments to advertising partners, was projected in April at between $1.2 billion and $1.3 billion.
Yang's return to the head of the company he helped set up 13 years ago also heightened speculation that Yahoo may be poised for more drastic moves. These could include possible partnerships with rivals or a merger with the likes of Microsoft Corp., Time Warner Inc.'s AOL or News Corp.'s MySpace, CNBC television reported.
Shares of Yahoo were the most heavily traded on Nasdaq on Monday, gaining as much as 6 percent after the news.
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, Kim Caughey, analyst at Fort Pitt Capital Group, said of potential merger and acquisitions.
Yang, 38, co-founded Yahoo in 1994 with fellow Stanford University student David Filo, as a navigational guide in the Web's early days. Born in Taipei, Yang was raised in the heart of Silicon Valley, after his family emigrated to San Jose.
For more than a decade Yang has had the title of Chief Yahoo, playing a key role in negotiating business development deals for the company. In an interview, Yang credited Semel for pushing him to play a greater role in operations and technology decisions, preparing him to be CEO.
While it is a tremendous responsibility, I am ready, Yang said on a conference call, adding that he expected Yahoo to remain a vibrant independent company.
OUT OF HOLLYWOOD
Semel was a long-time Hollywood studio executive who took charge of the loss-making company six years ago after the bursting of the technology stock bubble. He is credited with helping focus Yahoo on its advertising and media businesses.
But in recent years he faced heavy criticism for failing to move faster to meet both Google's challenge in Web search and advertising and, more recently, the rise of social networking sites such as MySpace and Facebook.
The past year has been a difficult one for Yahoo. I know that none of us has been satisfied with the results, Semel said on a conference call. I saw myself more as a coach rather than as a player, going forward.
Last week, one-third of Yahoo shareholders challenged the Sunnyvale, California-based company's direction at its annual meeting, voting against some board-nominated directors.
I am surprised that you didn't apologize for the last three years of performance, activist shareholder Eric Jackson said at the meeting, in comments directed at Semel.
By resigning as CEO, Semel receives no special compensation package, which would apply if he were forced out, he said.
Yahoo's key Web advertising business has suffered with weakness in some markets and delays in upgrading its search ad system to better take on Google. Yahoo's shares fell about 38 percent last year, but are up about 10 percent in 2007.
We face a growing competition from a broader and broader set of competitors, Yang said on the call with investors.
Speaking on CNBC, Michael Wolff, a Vanity Fair magazine columnist, cited sources at News Corp. as saying earlier on Monday they were considering making an offer to sell MySpace to Yahoo for $10 billion in exchange for a 25 percent Yahoo stake. MySpace is the world's most popular social networking site.
My sources are very upfront: They're 'mulling' -- that's the word they used -- 'We are mulling a transaction with Yahoo and the nature of that transaction would essentially be to sell MySpace to Yahoo,' Wolff said. MySpace declined to comment.
Semel, in an interview with Reuters after the CNBC report, declined to comment, saying, Needless to say, we would never talk about any acquisition talks and we have no comment.
Media reports say a Yahoo bid for Facebook worth upward of $1 billion was rejected by the No. 2 social network last year.
Separately, CNBC said Time Warner's CEO had recently told investors he was open to a deal to merge AOL with Yahoo, with the caveat that Yahoo would outsource its Web search business to Google, now AOL's search and advertising partner.
A Time Warner spokesman said the company does not comment on such speculation, but that it is committed to AOL. AOL has unveiled a new strategy, working well and showing results.
Shares of Yahoo gained $1.21 to $29.33 in after-hours trade following the company announcement. Ahead of the news, the stock had risen 81 cents, or 3 percent, to close at $28.12 on Nasdaq. More than 72 million shares traded hands.