Embattled Yahoo CEO Semel stepping down

updated 7:06 p.m. ET June 18, 2007

SAN FRANCISCO - Yahoo Inc. Chairman Terry Semel stepped down as chief executive in a surprise move Monday, ending his increasingly ineffectual pursuit of online search leader Google Inc. — a losing battle that had demoralized Yahoo’s shareholders and employees.

The Sunnyvale-based company appointed co-founder Jerry Yang as its new CEO and named Susan Decker as its president. Decker, who had been touted as Semel’s heir apparent, was recently promoted from Yahoo’s chief financial officer to oversee the company’s advertising operations.

Semel, 64, will remain chairman in a non-executive role after spending the past six years running the company.

Monday’s shake-up unfolded less than a week after Semel faced off with shareholders disillusioned with a nearly 30 percent drop in Yahoo’s stock price during the past 18 months as the company’s financial growth fell further behind Google’s torrid pace.

“The company is in good hands,” Semel said in an interview Monday. “I felt like it was time for me to move more into a coach’s role than a player’s role.”

Wall Street was clearly ready for a change. Yahoo shares gained 81 cents finish at $28.12 Monday, then surged $1.24, or 4.4 percent, in extended trading.

Signaling Semel’s decision was voluntary, Yahoo said he will not receive a severance package. The former movie studio executive already has made a fortune since joining Yahoo in May 2001, having realized nearly $450 million in gains by exercising some of the stock options he received during his tenure.

Despite Yahoo’s recent struggles, Semel received another big bundle of stock options last year that boosted the value of his 2006 compensation package to $71.7 million. That was more than any other CEO among 386 publicly held companies covered in an Associated Press analysis of executive compensation using new rules dictated by the Securities and Exchange Commission.

Paul Sakuma / AP “I am totally excited and energized about assuming the leadership of this great company,” Yahoo co-founder Jerry Yang said. “We have a long and prosperous future if we execute correctly.”

The options granted Semel last year were part of a contract that was supposed to ensure he remained Yahoo’s CEO through 2008.

In Monday’s conference call, an emotional Yang hailed Semel as “a role model and mentor” and then sought to defuse recent speculation that Yahoo might be sold to Microsoft Corp. or another suitor hoping to exploit the recent turmoil at the company.

(MSNBC.com is a joint venture of Microsoft and NBC Universal News.)

“I am totally excited and energized about assuming the leadership of this great company,” Yang said. “We have a long and prosperous future if we execute correctly.”

In an interview later Monday, Yang reiterated his belief that Yahoo will remain independent. “We are well aware of the challenges facing Yahoo,” he said. “We need to execute better and to get better talent. I feel Yahoo needed someone to be here for the long haul.”

Yang, 38, still owns a 4 percent stake in the company currently worth about $1.5 billion. Fellow co-founder David Filo, who is helping to run Yahoo’s technology group after the sudden retirement of the department’s leader earlier this month, owns a 6 percent stake worth about $2.3 billion.

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