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Originally published June 19, 2007 at 12:00 AM | Page modified June 19, 2007 at 2:01 AM

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Yahoo! founder succeeds embattled chief exec

Yahoo! announced Monday it has replaced Chief Executive Terry Semel with co-founder Jerry Yang, a week after shareholders expressed strong...

San Jose Mercury News

SAN JOSE, Calif. — Yahoo! announced Monday it has replaced Chief Executive Terry Semel with co-founder Jerry Yang, a week after shareholders expressed strong dissatisfaction with Semel's performance and pay.

The company said Semel would continue to serve as chairman of the board, in a non-executive advisory role, and Susan Decker, an executive vice president and former chief financial officer, would become president.

In a statement, Yang said he was "delighted to assume this leadership role at the company David Filo and I started 12 years ago."

Shareholders attending Yahoo's annual meeting protested Semel's $71.7 million compensation package in a symbolic vote against three board members who made up the compensation committee.

About one in three shareholders voted not to re-elect Roy Bostock, Ron Burkle and Arthur Kern.

"I am excited for the company," said Eric Jackson, a shareholder who sparred verbally with Semel at the meeting.

"I think Jerry Yang and Sue Decker are very capable and they will bring a lot of energy and passion to their new, enhanced jobs and will ultimately do a great job at leading the company," Jackson said.

Semel oversaw a turnaround after the dot-com collapse of 2000, but he has been under fire as Yahoo! has lost ground to Google.

The value of the company has fallen nearly 30 percent since 2005, as the delay of new advertising software and a steady exodus of talent caused concern Yahoo! had lost its competitive edge.

In a statement, Semel said he told the board "of my desire to take a step back sooner rather than later."

"I believe Jerry and Sue, with their superb talents and intense dedication to Yahoo! and its people, are the perfect combination to carry us forward," he said. "This is the time for new executive leadership."

Although Yang has never been CEO of Yahoo!, he has been part of the management team since co-creating the site with David Filo in 1994.

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Jackson, who represents a group of hundreds of Yahoo! shareholders, including current and former employees, said the founders have a lot of support within the rank and file.

"The technology world is filled with examples of company founders that have grown into the job," Jackson said. "One of the reasons why is they know the business better than anyone on the outside, and the best grow into their roles."

But some analysts were skeptical that the management change would solve Yahoo's problems.

While Semel was a lightning rod for criticism of the company, Yang deserved some of that scrutiny, said Trip Chowdhry, a financial analyst with Global Equities Research in Half Moon Bay, Calif.

As an executive officer since Yahoo's founding and its second-largest individual shareholder, Yang had the opportunity to help steer Yahoo! in the right direction. But it appears he didn't take action until shareholders raised a fuss about Semel's outsized salary, Chowdhry said.

"That's a big question mark about his [leadership] abilities," said Chowdhry, whose firm does not do any investment banking.

"It very much tells us that Yahoo! management has been sleeping for last three years, including Jerry Yang," he said.

Yang likely understands technology much better than Semel, whose background was in Hollywood, say analysts.

That's a good thing, because many of the problems Yahoo! faces are technological ones. In the race to exploit new Internet technologies such as video or social networking, it has trailed behind not only archrival Google, but many Internet startups also, analysts say.

But because Yang has had a major role throughout Semel's tenure, the move likely won't change Yahoo's outlook all that dramatically, said Todd Greenwald, an analyst with Nollenberger Capital Partners in San Francisco.

"It's not like Steve Jobs coming back to Apple or Michael Dell coming back to Dell," said Greenwald, whose firm has not done any investment banking with Yahoo!.

Moreover, he added, "All of the challenges they were dealing with yesterday, they're still dealing with. ... They will not go away over the next three to six months just because Terry's gone."

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