Yahoo boss resigns under pressure from shareholders

 

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By Reuters

Posted on 19 Jun 2007 at 08:53

Terry Semel has resigned as CEO of Yahoo to be replaced by Jerry Yang, a co-founder of the Web search business.

Yahoo said Semel has assumed the role of non-executive chairman and will serve as an adviser to Yang, named CEO, and Susan Decker, who was promoted to president and is considered a potential CEO.

Semel has been under scrutiny from shareholders who have expressed bewilderment at his generous pay packages while Yahoo stock has gone nowhere and rival Google widens its competitive lead. Semel, the former co-chairman of Warner Bros, has earned about $450 million, mostly from Yahoo stock options, since taking over as CEO in May 2001.

While Yahoo was rebounding from the bursting of the internet bubble, Semel's hefty compensation was a non-issue. More recently, Yahoo shares dropped 35% last year while Semel earned $71.7 million.

That was a bit too much to take for shareholders, who criticised Semel and other top management at the company's shareholder meeting last week, prompting observers to speculate that Semel would soon be out.

Semel earned kudos early on at Yahoo for quickly turning around the company and building shareholder value. When he joined six years ago, he purchased with his own money $1 million in Yahoo stock, which has more than tripled since then on a split-adjusted basis.

Success story?

Much like the success he reaped while running Warner Bros with co-chairman Bob Daly, Semel oversaw a rapid rise in revenue at the company. At Yahoo, sales jumped from about $750 million annually to $6.4 billion last year under his tenure.

But some said there was nothing spectacular about Semel's early success at Yahoo. Sure, the stock surged 225% during his reign - far outpacing the S&P 500's rise of 28.5% - but other internet stalwarts also fared well. Shares of Ebay, for example, are up 194% during the same time frame, and Amazon is up 387%.

More significantly, when Google, a direct competitor, went public three years ago, it had a market capitalisation of $23 billion compared with Yahoo's $39 billion. But Yahoo's value has since shrunk to $37.8 billion, while Google's worth has catapulted to $160.5 billion.

"Semel was made the gatekeeper to the promise of the internet, and he handed the keys to Google," says Cody Willard, a hedge-fund manager who has owned Google shares since its initial public offering.

"The internet is not to be centrally controlled," he says. "And Semel's Hollywood-crony approach to media is completely out of place in the age of empowerment."

Investors took Semel's resignation and the elevation of Yang and Decker as a positive sign. Yahoo shares advanced 3% during the regular session and another 5% in after-hours trading, when the announcement was made.