Yahoo reorganizes, shuffles executives

Moves made to help in battle with Google

Plugged In

December 07, 2006|By MarketWatch

SAN FRANCISCO -- Yahoo Inc. is revamping its operations and reshuffling its executive ranks as the Internet giant struggles amid stiff competition from Google Inc., but the moves fell short of what some on Wall Street had hoped for and its shares fell yesterday.

"We view this development as mixed," wrote Citigroup analyst Mark Mahaney, who rates Yahoo stock as a buy.

The shares, which have fallen 30 percent this year, slipped another 2 percent to close at $26.86.

Yahoo said it is reorganizing into three units, one focused on building its Internet audience, one that will deal with advertisers and publishers, and a third that will develop technology and products for the other two units.

The moves, announced Tuesday, include the departures of Chief Operating Officer Daniel L. Rosensweig and Lloyd Braun, head of Yahoo's media content group. Braun was brought to Yahoo from Hollywood by Chief Executive Officer Terry S. Semel to create original news and entertainment content.

Susan Decker, Yahoo chief financial officer since 2000, will become head of the advertiser and publisher group, giving her control over nearly all of the company's revenue-generating businesses. Some analysts see her ascension as a possible prelude to being named CEO.

Growth at Yahoo, which for years has owned the most-visited group of Web sites, has been eclipsed by Google, which has come to dominate the lucrative business of selling online ads alongside Internet search results.

Yahoo has grown unwieldy and bureaucratic, critics inside and outside the company have charged, and its offerings in the fast-growing segment of social networking sites have been outpaced by upstarts such as MySpace, now a unit of News Corp., and YouTube, acquired by Google this year.

Giving more responsibility to Decker, who is well-regarded on Wall Street, and the departure of Rosensweig, who will leave at the end of March, might help Semel deflect calls by some for change at the top.

The moves are "very likely a necessary step that carries the potential for improved operational efficiencies at the company," Mahaney wrote to clients.

Yahoo will begin a search for a new CFO to replace Decker and for an executive to head the Audience Group. The Technology Group will be led by Farzad Nazem, chief technology officer at Yahoo since 1998. The heads of all three groups will report directly to Semel.

Still, the company is in for a tough fight to regain its footing against Google, its chief rival.

Yahoo's sales for the third quarter, which ended in September, rose 20 percent to $1.12 billion, falling short of its initial forecast on weaker-than-expected online ad sales. By contrast, Google's third-quarter sales rose 70 percent to $2.69 billion, and its shares have climbed almost 20 percent this year.

Yahoo said it expects to complete the reorganization by the end of the first quarter, with the leadership changes to be effective Jan. 1. Decker will continue to serve as CFO while the company looks for a successor.

Frustrations at Yahoo were made clear in a memo written by Senior Vice President Brad Garlinghouse in November and circulated to key executives.

In the so-called "Peanut Butter Manifesto," Garlinghouse claimed that Yahoo had a bloated management structure with little room for accountability and had spread its investments too thinly - like peanut butter across bread - to be competitive. Yahoo's business endeavors range from e-mail to Internet search to online dating services and digital music.

"Change is needed, and it's needed soon," Garlinghouse wrote in the memo.

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