Bleeding market share, managerial talent and investor confidence, Internet giant Yahoo replaced chief executive Terry Semel yesterday with company co-founder Jerry Yang, who now faces the task of trying to catch up to Google.
When Semel, 64, arrived at Yahoo in 2001 after decades in Hollywood, he was seen as the mature, disciplined manager the company needed to survive the bursting of the Internet bubble. The Beverly Hills, Calif., resident commuted to Yahoo's Northern California headquarters in his private jet and reaped hundreds of millions of dollars in executive pay for stabilizing the company at a delicate time.
But in recent years, Semel and other Yahoo executives found themselves overmatched by the juggernaut they helped create: Google, whose search engine Yahoo promoted until it realized how profitable the younger company had become. As Yahoo faced constant attack in business areas that did not exist or much matter when he took the helm, Semel confided to friends that the job was taking a toll.
"The last couple of years have been tough," said Bob Daly, who ran Warner Bros. movie studio with Semel for 20 years. "The atmosphere is very competitive because of Google, and all of it was just wearing him down."
Wall Street welcomed Semel's departure. Yahoo shares jumped nearly 5 percent in after-hours trading following yesterday's announcement. They had risen 3 percent to $28.12 in regular trading on rumors that he might leave.
But some analysts questioned whether Yahoo could get back on track without an infusion of new talent and ideas in the top ranks. The new management team looks much like the old one.
Semel was named non-executive chairman of the company. The new CEO, Yang, who had held the whimsical title Chief Yahoo, has remained closely involved in the day-to-day operations of the company he founded with David Filo in 1995 while they were Stanford University graduate students.
And Susan L. Decker was promoted from executive vice president to president, in charge of winning more advertisers and Web surfers. Decker, Yahoo's 44-year-old former chief financial officer, is widely believed to be in line for the CEO job after getting some seasoning.
Decker and Yang "were significant players in getting Yahoo in the position it's in today," said Derek Brown, an analyst with Cantor Fitzgerald.
That position is a sticky one. An early innovator in e-mail and online advertising, Yahoo has been shouldered aside in recent years by Google, which is now the dominant player in Web advertising and has expanded into fast-growing businesses such as video sharing through its 2006 acquisition of YouTube.
Sunnyvale, Calif.-based Yahoo also faces pressure from smaller rivals such as Facebook and MySpace, which have siphoned off traffic and advertisers in the youth-oriented area known as social networking.
"From 1998 to around 2003, Yahoo was the gold standard for online advertising," Brown said. "Since then, consumers and advertisers have found other outlets."
The shake-up followed an annual meeting last week in which shareholders voiced their frustration in a contentious question-and-answer session. They also underlined their discontent in the proxy voting, where up to one-third of the ballots were cast against the company-nominated slate of directors. The directors ran unopposed and last year received 97 percent of the vote.
"This is the time for new executive leadership, with different skills and strengths, to step in and drive the company to realize its full potential," Semel said in a lengthy news release issued yesterday. "It is the right thing to do, and the right time is now."
Yang and director Ed Kozel, speaking for the board, praised Semel's leadership and highlighted the company's growth in revenue and Web traffic during his tenure.
The Internet pie is growing ever larger, but Yahoo's piece has been shrinking. Google has pulled away from its rival, both in terms of the percentage of total Internet ad revenue it collects and in the single largest category, search-engine advertising.
Thomas S. Mulligan and Alex Pham write for the Los Angeles Times. Times staff writers Dawn C. Chmielewski and Claudia Eller contributed to this article.