AP
Yahoo shakes up management amid shareholder unrest
Thursday June 26, 6:04 pm ET
By Michael Liedtke, AP Business Writer
Yahoo shakes up management team amid declining employee morale, shareholder unrest


SAN FRANCISCO (AP) -- Yahoo Inc. is setting up a new chain of command amid the turmoil triggered by the embattled Internet icon's snub of Microsoft Corp.'s $47.5 billion takeover bid.

Under the new pecking order announced Thursday, Yahoo executive vice presidents Hilary Schneider and Ash Patel are being given expanded responsibilities over the Sunnyvale-based company's products and sales teams.

Schneider, a former newspaper executive, has been moving up the ranks since she joined Yahoo in September 2006. Patel has played a key role in developing many of Yahoo's most popular products, including its finance section and instant messaging service, since joining the company 12 years ago.

Yahoo also is reorganizing its technology division in an effort to use its computing power more effectively and improve the coordination between its product developers and engineers.

This is the third time in 19 months that Yahoo has redrawn its management chart as it tries to snap out of a financial malaise that has ravaged its stock price, jeopardized its independence and demoralized employees.

In the other two shake-ups since November 2006, chief operating officer Dan Rosensweig and Chief Executive Terry Semel resigned.

This time, both of Yahoo's top executives -- co-founder and CEO Jerry Yang and President Susan Decker -- are staying put despite shareholder unrest about the company's recent decisions.

Decker said in an interview with The Associated Press that she and Yang had been working on the latest changes for several months as part of the company's efforts to become a one-stop destination for online advertisers and build an even more appealing Web site for consumers.

The overhaul comes as the company tries to fend off a shareholder mutiny led by activist investor Carl Icahn and to fill a leadership vacuum created as dozens of senior managers and top engineers have headed for the exits during the past year.

The exodus has accelerated since Yahoo signaled a lack of faith in its own technology earlier this month by turning to Internet search leader Google Inc. to help boost advertising revenue.

Some of the departing executives also may have been unhappy with the way their duties would change in the reorganization.

"When you go through something like this, you have to be prepared for some short-term dislocation for long-term benefit," Decker said.

Although he remains in charge, Yang might not be CEO much longer if he can't placate Yahoo shareholders still upset about the company's rejection of Microsoft Corp.'s $47.5 billion takeover offer.

Investors apparently weren't impressed with Thursday's shake-up. Yahoo shares fell 64 cents to finish at $21.37.

Yang is the focal point of shareholders' wrath because his prickly relationship with Microsoft CEO Steve Ballmer culminated in the withdrawal of the software maker's last oral offer of $33 per share. That offer was 72 percent above Yahoo's stock price before the bidding began.

The final straw came May 3 when Yang demanded $37 per share, a price that Yahoo's stock hasn't reached in nearly 2 1/2 years.

To make matters worse, Yahoo's market value has dropped nearly $10 billion, or 24 percent, since Yang replaced Semel as CEO a year ago.

Also complicating matters, Yang pushed for an employee severance plan that would cover all 13,800 of Yahoo's employees if the company is sold. Because the plan promises unusually generous payments to all employees who are fired or involuntarily reassigned to another job after a takeover, many Yahoo workers may be disappointed that a sale to Microsoft wasn't consummated.

With Microsoft out of the picture, the employees who were hanging around in hopes of collecting a rich severance package now have more incentive to look for another job.

Yang has promised that Yahoo is on the verge of a turnaround that will accelerate the company's revenue growth, but the projections have been met with widespread skepticism on Wall Street.

If he wins control of Yahoo's nine-member board later this summer, Icahn intends to fire Yang as CEO. Shareholders get to pick between Yahoo's current board -- including Yang -- and Icahn's alternate candidates at Yahoo's Aug. 1 annual meeting.

Icahn confirmed his plans Thursday in a Securities and Exchange Commission filing that also disclosed he now owns a 5 percent stake in Yahoo. If he overthrows the board, Icahn said he will publicly offer to sell Yahoo to Microsoft in a "friendly and cooperative" deal.

But Microsoft so far has maintained it no longer wants to buy all of Yahoo. The software maker has said instead that it's willing to buy Yahoo's search engine plus a large stake in the rest of the company. Icahn said he would consider a partial sale if Microsoft can prove the deal would propel Yahoo shares to at least $33.

If there appears to be enough shareholder opposition to Yahoo's current board, some analysts believe Yang may relinquish the CEO job before the annual meeting to squelch the revolt. Decker said she and Yang intend to keep working on a turnaround.

Should Yang step down, Decker is widely seen as the leading candidate to replace him, but that move also might be greeted coolly because some shareholders see her as responsible for some of Yahoo's problems, given she has been part of the company's executive team for eight years.