Is Yang right to run Yahoo?

Company co-founder will likely be an "interim" CEO, with President Sue Decker on deck, observers say.Photos: Boomerang bosses
Written by Elinor Mills, Contributor
Thirteen years ago, Jerry Yang was working on his doctoral degree in electrical engineering at Stanford University when he and fellow student David Filo created "Jerry Yang's Guide to the World Wide Web."

They left school to turn their little project into a company they called "Yahoo" and never looked back.

On Monday, Yang took over as the chief executive at Yahoo, replacing seasoned executive Terry Semel. Semel will assume the position of nonexecutive chairman and serve as an adviser to the management team and board of directors.

But is Yang, who ran the company when it was small but lacks Semel's management expertise and business sense, the right person for the top job at a company struggling to regain a foothold in search--and more importantly, lucrative search advertising--that was lost to Google?

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Analysts, former Yahoo employees and others say "yes," but only with newly named Yahoo President Sue Decker at his side. And some speculate that he's only filling the spot until Decker is ready to take the reins.

"Yang has got some strong backup, with Sue Decker as president," said Charlene Li, an analyst at Forrester Research. "The key thing he lacks is strong management experience of a large, complex organization...Semel brought discipline; now they need vision. (Yang) definitely has the credibility to do that."

Li added: "They had to do something. There was an attitude of 'anyone but Terry' at this point."

Greg Sterling, principal of consultancy Sterling Market Intelligence, speculated that Yang's new job will be temporary and that Decker is being groomed to become the permanent CEO.

"Yang is a known commodity, and they're trying to reassure the market," Sterling said. "Probably, it's the case that he's the interim CEO...If they had brought in a rock star, that might have changed the dynamics of the company and prevented or delayed Decker's ascension to the ultimate CEO role."

Boomerang bosses

A company reorganization and management shuffle six months ago led many to surmise that Yahoo was grooming Decker to become CEO. Since then, she had continued serving as chief financial officer until the company recently named investment banker Blake Jorgensen as CFO. She was then free to assume the role she had been assigned during the shakeup late last year as head of the advertising business.

In the current reorganization, the advertising and consumer divisions will be integrated under Decker's leadership.

Yang is respected as Yahoo's co-founder and therefore holds influence. For example, he is involved in every executive decision at Yahoo, insiders say. More importantly, in this case, Yang--whose title is "chief Yahoo"--is considered a passionate user of the network and dedicated to a creating a good user experience. He's been responsible for numerous design overhauls on the Yahoo home page.

Yang's passion for Yahoo, industry watchers say, runs in stark contrast to Semel's, who isn't known to be an avid user of Yahoo specifically or the Internet in general.

"You couldn't get an outsider to understand the company better than Yang," said one executive, who spoke on the condition of anonymity. "He's been the voice of the user for a long time."

Decker described Yang as the "heart and soul of Yahoo" during a conference call discussing the changes.

Still, Yang is seen by the staff as neither a savior nor a great articulator for Yahoo's vision. He's more of a behind-the-scenes man. For that reason, some current and former Yahoo employees also believe that Yang will act as CEO on an interim basis until the company gets back on track or until Decker is ready to take over.

Decker may be the "strategic powerhouse" and "financial wizard" that Semel said she is during the conference call, but Yang brings the technological know-how that neither Semel nor Decker possess, observers noted.

Plus, they said, Yang is beloved by the employees; he's close to engineers; and having served as the face of Yahoo since its inception, he's part of the brand.

"The combination of Sue and Jerry is pretty smart. I think of Jerry as a visionary who helped create the commercial Internet," said Rob Solomon, chief executive of travel Web site SideStep and former vice president and general manager of Yahoo's commerce unit. "Sue is one of the best managers in the world," he added, noting that she serves on the boards of Costco, Intel and Berkshire Hathaway.

"I think Jerry has a good rapport with people at the company and is more tech savvy," said Greg Morrow, former director of product strategy at Yahoo Music and founder of viral video site Pure Video.

"To Terry's credit, he brought some discipline and structure to the company that was much needed at the time and created a monetization strategy," Morrow said. "Now they just need to bolster their product credibility vis a vis some of the up-and-comers and Google...This changing of the guard will help."

Semel, recruited from Warner Bros. in 2001 where he was CEO, was criticized at last week's shareholder meeting for the company's lackluster financial results of late. A proposal to link his compensation--totaling about $70 million despite his $1 annual salary, making him one of the highest paid CEOs in America--with the financial performance of the company received a relative large number of votes, representing more than 30 percent support by shareholders. Meanwhile, shareholders re-elected the board with only 66 percent approval, far less than the typical 80 to percent 90 percent approval rate.

It's possible that Yang has learned some management skills from Semel during his tenure. Yang said during the conference call that Semel was his "role model" and "mentor." "I've learned how to become a better leader and a better person," a choked-up Yang said.

Yang said he was honored to be appointed CEO and that he was ready for the challenge. "I know the business and market dynamics well," he said, adding that he had worked over the years to drive the strategy at Yahoo.

Whether Yang will be able to get Yahoo back on course and regain the credibility, market share and leadership it lost when Google raced by is unknown.

"They still have real issues to solve," Sterling said. Yahoo has got to "regain their momentum, and this is a first step in a longer process."

Stefanie Olsen of CNET News.com contributed to this report.

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