Embattled Yahoo CEO Semel stepping down

This will mark the first time that Yang — previously known as “chief Yahoo” — has been in charge of the company in more than a decade.

Since Semel’s arrival in May 2001, Yahoo’s stock has nearly tripled as the company benefited from the influx of advertising flowing to the Internet from newspapers, magazines and other more established media.

But Yahoo’s inability to capitalize on the shift as adroitly as Google tarnished Semel’s legacy.

Mountain View-based Google now makes more money in a single quarter than Yahoo does in an entire year. The contrast represents a harsh comedown for Yahoo, which was the larger of the two companies when Google went public in August 2004.

Since then, Google has steadily expanded upon the Internet’s largest advertising network to create nearly $140 billion in shareholder wealth as its stock price increased by more than sixfold. Yahoo’s stock, meanwhile, is worth a little bit less than when Google went public.

Google’s meteoric rise is an especially hard pill for Semel to swallow because he once flirted with the idea of buying Google. In mid-2002, Semel reportedly terminated negotiations when Google set its sales price at $5 billion.

Google’s success since then has decimated the employee morale at Yahoo, leading to a recent wave of executive departures that raised concerns about whether the company would be able to retain the talent it needs to regain its stride.

Just last week, Semel assured shareholders attending Yahoo’s annual meeting that he had the fortitude to lead a comeback. He has been counting on recent improvements to Yahoo’s online advertising system and a series of key partnerships to boost profits after the company suffered an 11 percent drop in its first-quarter earnings.

In Monday’s conference call, Decker said the advertising upgrade, known as Panama, is delivering results that so far have exceeded management’s expectations.

The last 18 months represented Yahoo’s toughest stretch since the dot-com bust.

With Yahoo’s losses mounting as ad revenue evaporated, Yang recruited Semel to take the reins. The choice befuddled much of Silicon Valley because Semel was already old enough to qualify for senior citizen discounts and by his own admission barely knew how to use e-mail.

After initial backlash, Semel won over many investors by streamlining Yahoo’s operations and then engineering a series of deals that gave the company the tools it needed to build its own search engine rather than rely on technology licensed from Google, which was then regarded as a kooky startup.

Yahoo bounced back from a $93 million loss in 2001 to post steadily higher earnings through 2005 when its profit peaked $1.9 billion. The 2005 results included a $961 million windfall that Yahoo realized by liquidating the stock that it once owned in Google.

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