Terry Semel has ended his six-year run as Yahoo's chief executive officer, and company co-founder Jerry Yang will take over, the company said.
Semel has been the focus of intense criticism in the past two years due to Yahoo's inability to capitalise as much as expected on the fast-growing search advertising market. By contrast, Google has enjoyed eye-popping revenue growth and enviable profits almost exclusively from that market.
Yahoo gets a CEO of the calibre of Steve Jobs and Bill Gates who can match Google's triumvirate of engineers, said Allen Weiner, a Gartner analyst, referring to Google's CEO Eric Schmidt and co-founders and presidents Larry Page and Sergey Brin.
"I always felt that the best CEO for Yahoo already worked there: Jerry Yang," Weiner said. "He is far and away the best choice they could have made."
Last week, at Yahoo's annual shareholder meeting, Semel fielded stinging criticism from shareholders in attendance, leading to tense exchanges at times.
Semel resigned from his position as CEO and chairman and will become non-executive chairman and serve as advisor to the management team.
Semel became chairman and CEO in May 2001.
Previously, Semel spent 24 years at Warner Bros, where he was chairman and co-chief executive officer. Prior to that, he led Walt Disney's Theatrical Distribution division and CBS' Theatrical Distribution division.
Semel was brought in primarily to create a bridge between the Hollywood entertainment industry and Yahoo, which never happened as originally envisioned, Weiner said. "That strategy didn't work," he said.
Because Yang is an engineer who fully understands the Internet market and Yahoo's business, Weiner predicts the company troops will rally behind him. "This is a seminal event in the history of Yahoo," Weiner said.
The board of directors appointed Yang, who co-founded the company 12 years ago, as CEO, and Susan Decker, former executive vice president and head of Advertiser and Publisher Group, as the company's president.
This change is something that the market obviously wanted, according to industry analyst Greg Sterling from Sterling Market Intelligence. When he joined Yahoo, Semel helped bring the company back from the brink, but recently he seemed to have lost the magic touch he had earlier.
"If Yahoo had another lacklustre quarter, the chorus of calls for Semel's resignation would have gotten louder. This might be seen as a pre-emptive move by Semel," Sterling said via email. The question that remains is whether this executive change will have the desired effects, he said.
In a webcast, Semel said he had told the board that he wanted to step back from his executive role "sooner rather than later" and that he and the board agreed this would be a good time for him to step down as CEO.
"I've long been talking to the board about the importance of ensuring a smooth succession to Yahoo's senior leadership," Semel said.
Semel expressed full confidence that Yang and Decker are the right people to carry Yahoo "through its multi-year transformation" while acknowledging that the past year has been a difficult one for Yahoo and that no one in Yahoo's management has been satisfied with the company's performance.
Decker and Yang both said during the webcast that they are confident Yahoo will meet its current revenue forecasts, issued in April, and attain long-term success.
The company's new search advertising platform, Panama, is yielding financial results above expectations, and as such offsetting a slowdown in display advertising, they said.
"I believe Yahoo has all the assets it takes to win and we're well positioned to do that," Yang said.
A major structural reorganisation of the company launched in December under Semel's watch has had the expected results so far, Decker said. It's now easier to make major business decisions, she said, citing as examples the recent closure of Yahoo's under-performing US online auction business and the streamlining of the photo business under the Flickr service and the forthcoming closure of Yahoo Photos.
Another result is the creation of a business unit for the team in charge of Yahoo's home page, which she said has given that team more independence and yielded a better product.
Likewise, the video efforts are being unified and given common objectives, leading to a better user experience and more effective advertising efforts, she said.
Decker, who was the company's chief financial officer for seven years, said she and Yang are confident that Yahoo will be able to address the deceleration in the display advertising business with its acquisition of Right Media, announced in April.
While Yahoo has traditionally been strong in sales of premium display and graphical ads, Right Media will boost its ability to sell non-premium ad inventory via a real-time marketplace that brings together advertisers and publishers, she said.