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Thursday, December 07, 2006

At Yahoo, Rising Finance Chief Faces a Host of Challenges

Recharging Yahoo Ad Systems a Big Test for Susan Decker
The leading CEO Successor at Yahoo.

edit of wall street journal story

Yahoo's reorganization vaults Susan Decker, a highly regarded chief financial officer with limited operational experience, to oversee some of the companies' biggest challenges.

Under the new yahoo management overhaul Ms. Decker, 44 years old, assumes responsibility for Sunnyvale, Calif., based Yahoo revenue-generating activities, including its sales of online advertising for Yahoo and partner sites.

Yahoo's shares have slumped more than 31% since the beginning of the year, amid a delay to a key ad-system upgrade (Yahoo Panama) and slowing revenue growth the company partly attributed to increased competition from rival Web sites for ad dollars. Yahoo needs to improve organic search results.

As head of Head of Yahoo's Advertiser & Publisher Group Ms. Decker will be charged directly with tackling such ad-related issues, which some people close to the company characterize as a test of her fitness to potentially succeed Chief Executive Terry Semel, 63 years old, upon his eventual retirement.

Yahoo said its new corporate structure, which was also accompanied by the announced departure of several senior executives including Chief Operating Officer Dan Rosensweig and Yahoo Media Group head Lloyd Braun and possibly 1,300 other Yahoo employees, increases accountability and speeds decision-making.

Can Yahoo quickly repair and improve its tired search engine and second tier online-advertising systems, with the latest overhaul dubbed internally as "Yahoo Panama."?

Yahoo expects the Panama upgrade, that began in late July and delayed several times and then hastily and only partly launched, to help increase profits starting early in 2007, though key executives have conceded uncertainties about the timing or magnitude of the boost. As numerous technical snafus have plagued Panama to date.

That makes the new role of Ms. Decker, a former equity-research analyst and fan of investor Warren Buffett, a crucial one for the company. Ms. Decker, who joined Yahoo as chief financial officer in June 2000, has frequently handled more chores than the traditional finance functions of a chief financial officer, say people familiar with the matter, but her profile has increased in the past year.

Ms. Decker led Yahoo's talks with eBay Inc., in which Yahoo beat out Google Inc. and Microsoft Corp. for a pact to serve ads on eBay's auction site and marketplace in the U.S. this year. Semiconductor giant Intel Corp. last month named her to its board of directors.

Ms. Decker has limited experience in operations at Yahoo. "The Street is going to perceive this, fair or not, as a test for Sue: Can she run an operational unit?" says Benjamin Schachter, an Internet analyst at UBS Securities, whose parent company or its subsidiaries own a stake in Yahoo.

As part of a separate reorganization announced in September, Ms. Decker added operational oversight over a new unit that includes classifieds, dating, jobs, real estate, travel, autos, shopping and auctions, now part of her expanding group under this week's restructuring. Yahoo said Ms. Decker will also continue to perform her finance duties until it finds a successor in that role.

A Yahoo spokeswoman said Ms. Decker's changing role was unrelated to any succession planning and that Mr. Semel had no plans to leave the company (yet).

Regarding Ms. Decker's limited experience running operations, the spokeswoman said, "If anyone can do it, I'm sure it's Sue Decker." The spokeswoman said Ms. Decker or other company executives were not available to comment.

Under the reorganization, Senior Vice President Jeff Weiner, 36 years old, also assumes a more prominent role in the company. Mr. Weiner, who worked with Mr. Semel at Warner Bros. and the Windsor Digital private-equity firm prior to joining Yahoo in 2001, has overseen Yahoo's efforts to challenge Google in Web search and squeeze more money from its frazzled search advertising system. Now Mr. Weiner will have responsibility for a broad swathe of the company's products, including search, under a yet-to-be-named head of a newly created Audience Group.

Some people close to Yahoo describe the new role as a test of Mr. Weiner's management skills and describe his track record as somewhat mixed, given how Google is broadening its lead in Web search market share in recent years and the delay in the Panama project.

The Yahoo spokeswoman said Mr. Weiner deserved credit for Yahoo's efforts to launch its own search technology in 2004 and recent initiatives, such as its popular Answers service, while any problems with the search ad system predated his responsibility. Mr. Weiner will oversee the rollout of the Yahoo Panama upgrade through at least the first quarter of 2007.

With his resignation, Mr. Rosensweig will join a pack of top media and Internet executives whose departures from their posts have been announced this year amid a rapidly changing industry landscape. They include eBay Chief Operating Officer Maynard Webb and PayPal unit President Jeff Jordan, News Corp.'s Fox's digital czar Ross Levinsohn, Viacom Inc. CEO Tom Freston and Jonathan Miller, chief executive of Time Warner Inc.'s America Online Internet unit.

Mr. Rosensweig said he was leaving Yahoo of his own accord at the end of March, after having been asked by Yahoo to assume a role that was "to be bigger and fun" but to which he was asked to commit for another three years or longer. Mr. Rosensweig said ultimately he "was ready for something new."

Wednesday, December 06, 2006

Yahoo Announces Major Shake-Up

Streamlining Focus On (3) Core Areas: Audience, Advertising, Technology

Yahoo is tackling its most difficult challenge since the dot-com bust with sweeping organizational changes aimed at cleaning up a mess of the Internet icon's own making.

The overhaul, announced Tuesday night, represents Yahoo's mea culpa for meandering aimlessly during the past year, to the chagrin of investors and the delight of competitors like Google Inc. that lured away online traffic and advertisers.

Yahoo has fallen out of favor on Wall Street largely because Google — the Internet's search leader — has done a far better job of figuring out which ads are most likely to elicit clicks. That action generates more profits for Google and its partners while keeping advertisers happy with a steady stream of prospective customers.

To compound its misery, Yahoo has been introducing a mishmash of products with no clear strategy on how they blend into the rest of the mix on its Web site. The scattershot approach appears to have aggravated and confused many consumers who are gravitating to new Internet hot spots such as News Corp.'s and YouTube, which Google just bought for $1.76 billion.

Sunnyvale-based Yahoo believes it can get back on track by consolidating its operations into three groups focused on its audience, advertising network and behind-the-scenes technology.

The shake-up will reshuffle top management, entrusting Chief Financial Officer Susan Decker to fix the problems bedeviling Yahoo's advertising system and opening a job for an executive who will be hired to guide efforts to make Yahoo's Web site more useful and relevant.

At least two top executives won't be part of Yahoo's new agenda.

Lloyd Braun, a former television executive hired two years ago to run Yahoo's media division in Southern California, has already left the company. Dan Rosensweig, Yahoo's chief operating officer since 2002, will step down in March once the reorganization is complete.

Yahoo Chairman Terry Semel remains chief executive, although his job security and legacy at the company may be riding on how well this makeover pans out.

Once revered on Wall Street for reviving Yahoo after the dot-com meltdown, Semel has come under fire this year amid slowing profit growth that has battered the company's stock price.

Semel's fix-it strategy didn't impress investors Wednesday. Yahoo shares fell 57 cents to close at $26.86 on the Nasdaq Stock Market. Yahoo's stock price has plunged by more than 30 percent so far this year, to wipe out nearly $20 billion in shareholder wealth.

The fallout might include pink slips for some of its 11,000 employees.

Banc of America Securities analyst Brian Pitz predicted in a Wednesday research note that Yahoo will consider pruning its payrolls next year as part of an effort to boost its profits.

Standard & Poor's analyst Scott Kessler also thinks Yahoo might clean house in its media division now that Braun is gone. "You have to wonder about the long-term future there," Kessler said. "You could see some paring down there."

Yahoo spokeswoman Kelly Delaney declined to comment about the chances of future layoffs, but Semel downplayed the possibility in a statement posted on the company's Web site. "Let me stress that we're organizing the company for growth and are continuing to hire great talent," he wrote.

Brad Garlinghouse, a Yahoo senior vice president in charge of the company's communications products, made a case for 1,500 to 2,000 layoffs in a recent memo that was leaked to the media.

"For far too many employees, there is another person with dramatically similar and overlapping responsibilities," Garlinghouse wrote. "This slows us down and burdens the company with unnecessary costs."

That memo, which likened Yahoo's business recipe to peanut butter spread too thinly over toast, foreshadowed some of the actions taken in Tuesday's shake-up. But in his Web posting, Semel indicated that the reorganization began to take shape before Garlinghouse wrote his memo.

In an attempt to address it most pressing problem, Yahoo has been working on a series of improvements to its advertising formula. After promising to unveil the advertising change by the crucial holiday shopping season, Yahoo encountered unexpected hiccups that delayed any financial gains until next year.

Decker, a former Wall Street analyst who has been Yahoo's CFO for six years, is being entrusted to make sure the advertising upgrades pay off. The decision to put her in such a crucial job makes her a prime candidate to succeed the 63-year-old Semel.

"It's obvious Sue Decker is now the heir apparent," Kessler said. "I think (the board) may want to see how she does in an operational capacity before letting her move in as CEO."

Decker will be up to the challenges ahead, predicted Rob Solomon, a former Yahoo executive who left the company nearly a year ago to become CEO of SideStep, a Silicon Valley search engine focused on travel. "Sue Decker is brilliant, always the smartest person in whatever room she walks into," Solomon said.

Semel may have held on to his job for now because a change-in-command during the final weeks of the holiday shopping season probably would have rattled investors already antsy about the forthcoming improvements to the advertising model, Kessler said.

A former movie executive, Semel still has a residual of goodwill for lifting Yahoo out of the dot-com doldrums after he joined the company in May 2001.

Back then, Yahoo was floundering along with just about every other company whose business relied on the Internet. Semel turned things around in a traumatic reorganization that eliminated hundreds of jobs before engineering a series of key acquisitions that paid off as refurbished computer systems advertisers shifted more spending to the Internet.

This time, though, Yahoo's troubles seem to be largely self-inflicted, raising questions whether the company needs new blood to heal the wounds.
Yahoo Shakes Up Management and Company.

The Yahoo Panama implosion continues.

Summary of MarketWatch story with updates from Peak Positions

Yahoo CFO Decker to switch jobs, report directly to CEO Semel; COO resigns.

Yahoo Inc. is revamping its operations and reshuffling its executive ranks as the Internet giant struggles amid stiff competition from Google Inc., but the moves continue to fall far short of expectations.

The one-time $400 a share YHOO stock now trades at 26, and has fallen more than 30% this year. Yahoo will reorganize into three units, one focused on building its Internet audience, one that will deal with advertisers and publishers, and a third group that will develop technology and products for the other two units.

The turmoil at Yahoo includes the departure of Chief Operating Officer Dan Rosensweig and Lloyd Braun, head of Yahoo's media content group. Braun was brought to Yahoo from Hollywood by Yahoo Chief Executive Terry Semel to create original news and entertainment content.

Susan Decker, who has served as Yahoo chief financial officer since 2000, will become head of the company's advertiser and publisher group, giving her control over nearly ALL of the company's revenue-generating businesses. Many believe Decker is to become Yahoo CEO.

Growth at Yahoo, which for years has owned the most-visited group of Web sites, has been eclipsed by Google, which has come to dominate the lucrative business of selling online ads alongside Internet search results.

Yahoo has grown unwieldy and bureaucratic, critics inside and outside the company have charged, and its offerings in the fast-growing segment of social networking sites have been outpaced by upstarts such as MySpace, now a unit of News Corp., and YouTube, acquired by Google (GOOG).

Giving more responsibility to Decker and the sudden departure of Rosensweig, who will leave at the end of March, may help Semel deflect loud crys for change at the top.

The moves are "very likely a necessary step that carries the potential for improved operational efficiencies at the company," Mahaney wrote in a note to clients.

Yahoo will begin a search for a new CFO to replace Decker and for an executive to head the Audience Group. The Technology Group will be led by Farzad Nazem, Chief Technology Officer at Yahoo since 1998. The heads of all three groups will report directly to Semel.

Still, Yahoo is in for a tough fight to regain its footing against Google, it's chief rival.

Yahoo's sales for the third quarter ended in September rose 20% to $1.12 billion, falling short of its initial forecast on weaker-than-expected online ad sales. By contrast, Google's third-quarter sales rose 70% to $2.69 billion, and its shares have climbed almost 20% this year.

Decker will continue to oversee Yahoo's Marketplaces business unit as part of the Advertiser & Publisher Group, which will focus on the "transformation of how advertisers connect with their target customers across the Internet."

Yahoo said it expects to complete the reorganization by the end of the first quarter, with the leadership changes to be effective Jan. 1. Decker will continue to serve as CFO while the company looks for a successor.

Semel said Yahoo plans to drive growth and profitability by creating "a full-fledged advertising network, with a marketplace that meets supply and demand both on Yahoo's valuable owned-and-operated network and across the entire Internet."

??? whatever ??? how about increasing the quality of Yahoo search results and driving more content relevance throughout the old and tired Yahoo keyword search system.

Improving search results might actually serve users and help Yahoo return improved search results, thereby driving search traffic, page views, SEM click thrus and market share. When will Yahoo stop trying to be all things to all users and instead return their focus to keyword search.

Keyword Search is only the second most popular online activity.

Yahoo still maintains dominance in the most popular online actitivy: email retrieval however, their decision to abandon keyword search continues to result in keyword searchers and market share abandoning Yahoo.

The e-world still remembers Terry Semel's and Yahoo's decision to augment and fill out Yahoo search results with Google search data. In turn Semel and Yahoo helped create Google Mania. Yahoo has been flaming out ever since.

The once proud, dominant keyword search market leader now has to fight with the many also rans for search scraps.

On their knees they remain at Yahoo tired and hungry poor souls seeking a mere slice of the pie they created.

Last month, in its third-quarter financial report, Yahoo noted that its offerings to users and businesses fell into four categories: search, marketplace, information and entertainment; and communications and connected life.

Frustrations at Yahoo were recently made clear in a memo written by Yahoo senior vice president Brad Garlinghouse in November and circulated to key executives.

In the so-called "Peanut Butter Manifesto," Garlinghouse claims Yahoo has a bloated management structure with little room for accountability and had spread its investments too thinly - like peanut butter across bread -- to be competitive.

Yahoo's business endeavors range from email to Internet search to online dating services and digital music.

"Change is needed at Yahoo, and it's needed soon," Garlinghouse wrote in the memo.

Among other efforts, Braun was able to get Yahoo to contribute original content to enhance its aggregated content.

Industry observers have said that Vince Broady or Scott Moore, who have reported to Braun, could be picked to take over for him. Earlier this year, Yahoo brought in GameSpot founder Broady to head the games and entertainment. Moore runs news, finance, technology, sports and lifestyle.

"Over the last two years, the Yahoo Media Group has developed and launched a ground-breaking template for the next generation of media experiences on the Internet," Braun said in a statement.

"There is much more to come in the months ahead. I am proud to have led this team of extraordinary professionals, and I wish Yahoo the greatest success in the future."

More developments are sure to occur at Yahoo as 2006 closes out.