Yahoo tries to fix the mess it has made

“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 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.

MORE FROM U.S. BUSINESS

U.S. business Section Front

Google workers see huge potential windfall   Broadcaster Citadel files Chapter 11 bankruptcy Morgan Stanley’s CEO forgoes bonus again Google reportedly in talks to buy Yelp NYC tops the list of America’s costliest cities ‘Bad boy’ clauses can sink Woods, other stars Bottled water sales slow amid backlash Legal fees mount in Madoff liquidation BofA’s new CEO faces tough job in year ahead Senate panel approves Bernanke nomination U.S. business Section Front   Add U.S. business headlines to your news reader: