Investor's Business Daily, June 18th, 2007
Pressured by shareholders unhappy at Yahoo's failure to gain ground against Google, Yahoo late Monday said co-founder Jerry Yang would replace Terry Semel as CEO -- leading some analysts to predict the Web portal will be sold or merge with another company.
Yahoo shares were up about 4.5% after hours Monday.
Yang, 38, and David Filo founded Yahoo YHOO in 1994. It's long been the most-visited Web portal, but lags Google GOOG in the key area of online search -- and search ads.
Semel got the blame for Yahoo's failures. The 64-year-old former co-CEO of Warner Bros. was recruited to lead Yahoo in May 2001. Semel brought some Tinseltown cachet to Yahoo, but has faced tough competition from Microsoft MSFT, Time Warner TWX and others besides Google.
"The ideal situation for them would be to merge or sell the company to a media company or a large telecommunications company," said Shahid Khan, a partner with IBB Consulting Group, a media consulting firm. "Yahoo missed the boat."
Others agreed.
"My inclination is to think of Yahoo as more of a strategic partner for another firm," said David Garrity, an analyst for Dinosaur Securities, an investment bank. "The best value for shareholders might be realized by a merger. I still believe that a Microsoft-Yahoo merger makes the most sense, but I know that a lot of people disagree."
Those people include Yang. In a conference call with analysts after Monday's announcement, he said Yahoo's board believes the company should remain independent.
"We are in this for the long haul. The board and I believe that Yahoo is and can and will be a vibrant independent company," Yang said.
Investors, though, had become disenchanted with Semel's efforts to build that vibrant company.
He faced tough questions at Yahoo's annual meeting last week from shareholders unhappy with what they called his excessive compensation.
One big issue has been Yahoo's delay in making more money from paid search, Google's longtime bread and butter. Yahoo finally started releasing its paid search program, named Panama, in October, at least one quarter behind schedule. It wasn't fully out until February. By then, Google had a dominant hold in the market.
But Yahoo executives say they still expect Panama will help the company cash in on the big jump in online advertising.
Paid search, though, is just one area where Yahoo has lagged. Analysts say Yahoo should have bought social networking leader MySpace. Rupert Murdoch's News Corp. NWS bought that company in 2005.
Some observers also said Yahoo was a natural to cash in on online music, but Apple AAPL took that initiative with its iTunes service.
"It's a competition that Yahoo lost under Semel's leadership," Garrity said.
Semel will stay on as Yahoo's non-executive chairman.
In addition, Susan Decker was promoted to president. The company's longtime chief financial officer, Decker was named head of the advertiser and publisher group in a December management shakeup. Part of the shakeup included the resignation of Lloyd Braun, one of Semel's prize Hollywood recruits.
