Skip to Content

Yahoo’s CEO resigns, giving new hope for frustrated investors

SAN FRANCISCO (AP) – After exasperating investors for most of the past 18 months, Yahoo Inc. Chairman Terry Semel finally found a way to please Wall Street by stepping aside as chief executive.

Semel’s capitulation, announced late Monday, came less than a week after he faced off with shareholders disillusioned with the company’s lackluster performance as Internet search leader Google Inc. pulled further ahead in the lucrative online advertising market.

The malaise had contributed to a nearly 30 percent drop in Yahoo’s stock price since the end of 2005.

To fill the void created by Semel’s departure, Yahoo appointed company co-founder Jerry Yang as its new CEO and named Susan Decker as its president. Decker, who had been touted as Semel’s heir apparent, was recently promoted from Yahoo’s chief financial officer to oversee the company’s advertising operations.

Semel, 64, will remain chairman in a non-executive role after spending the past six years running the company.

”The company is in good hands,” Semel said in an interview Monday. ”I felt like it was time for me to move more into a coach’s role than a player’s role.”

Wall Street applauded the new pecking order. Yahoo shares gained 81 cents finish at $28.12 Monday, then surged $1.33, or 4.7 percent, in extended trading.

Signaling Semel’s decision was voluntary, Yahoo said he will not receive a severance package. The former movie studio executive already has made a fortune since joining Yahoo in May 2001, having realized nearly $450 million in gains by exercising some of the stock options he received during his tenure.

Despite Yahoo’s recent struggles, Semel received another big bundle of stock options last year that boosted the value of his 2006 compensation package to $71.7 million. That was more than any other CEO among 386 publicly held companies covered in an Associated Press analysis of executive compensation using new rules dictated by the Securities and Exchange Commission.

The options granted Semel last year were part of a contract that was supposed to ensure he remained Yahoo’s CEO through 2008.

In a conference call Monday, an emotional Yang hailed Semel as ”a role model and mentor” and then sought to defuse recent speculation that Yahoo might be sold to Microsoft Corp. or another suitor hoping to exploit the recent turmoil at the company.

In an interview later, Yang reiterated his belief that Yahoo will remain independent. ”We are well aware of the challenges facing Yahoo,” he said. ”We need to execute better and to get better talent. I feel Yahoo needed someone to be here for the long haul.”

Greg Sterling of Sterling Market Intelligence said the next few months may determine Yahoo’s fate.

”Yahoo still has a lot of great opportunities, but it’s also a very precarious time for them,” Sterling said. ”They can’t afford to be tentative.”

Yang, 38, still owns a 4 percent stake in the company currently worth about $1.5 billion. Fellow co-founder David Filo, who is helping to run Yahoo’s technology group after the sudden retirement of the department’s leader earlier this month, owns a 6 percent stake worth about $2.3 billion.

This will mark the first time that Yang – previously known as ”chief Yahoo” – has been in charge of the company in more than a decade.

Since Semel’s arrival in May 2001, Yahoo’s stock has nearly tripled as the company benefited from the influx of advertising flowing to the Internet from newspapers, magazines and other more-established media. But Yahoo’s inability to capitalize on the shift as adroitly as Google tarnished Semel’s legacy.

Mountain View-based Google now makes more money in a single quarter than Yahoo does in an entire year. The contrast represents a harsh comedown for Yahoo, which was the larger of the two companies when Google went public in August 2004.

Since then, Google has steadily expanded upon the Internet’s largest advertising network to create nearly $140 billion in shareholder wealth as its stock price increased by more than sixfold. Yahoo’s stock, meanwhile, is worth a little bit less than when Google went public.

Google’s meteoric rise is an especially hard pill for Semel to swallow because he once flirted with the idea of buying Google. In mid-2002, Semel reportedly terminated negotiations when Google set its sales price at $5 billion.

Google’s success since then has decimated the employee morale at Yahoo, leading to a recent wave of executive departures that raised concerns about whether the company would be able to retain the talent it needs to regain its stride.

”It’s a tough place to be when you see another company eating your lunch like that,” said Mike McGuire, an analyst at Gartner Inc.

Just last week, Semel assured shareholders attending Yahoo’s annual meeting that he had the fortitude to lead a comeback. He has been counting on recent improvements to Yahoo’s online advertising system and a series of key partnerships to boost profits after the company suffered an 11 percent drop in its first-quarter earnings while Google’s profit soared 69 percent.

In Monday’s conference call, Decker said the advertising upgrade, known as Panama, is delivering results that so far have exceeded management’s expectations.

Keep Reading

Most Popular

10 Breakthrough Technologies 2024

Every year, we look for promising technologies poised to have a real impact on the world. Here are the advances that we think matter most right now.

Scientists are finding signals of long covid in blood. They could lead to new treatments.

Faults in a certain part of the immune system might be at the root of some long covid cases, new research suggests.

AI for everything: 10 Breakthrough Technologies 2024

Generative AI tools like ChatGPT reached mass adoption in record time, and reset the course of an entire industry.

What’s next for AI in 2024

Our writers look at the four hot trends to watch out for this year

Stay connected

Illustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at with a list of newsletters you’d like to receive.