Wednesday, June 13, 2007

LA Times: Yahoo execs defend firm as investors lament results

From today's LA Times:

By Michelle Quinn, Times Staff WriterJune 13, 2007

SANTA CLARA, CALIF. — Yahoo Inc. co-founder Jerry Yang said Tuesday that the Internet company was entering its "teenage years." Investors complained about the growing pains.

Yahoo Chief Executive Terry Semel presided over the company's annual shareholder meeting here, emphasizing the positives but acknowledging missed business opportunities.

The pressure is on Semel, who joined Yahoo in 2001 from Warner Bros., to rejuvenate the Internet firm's business. Shareholders on Tuesday expressed dismay with a rash of executive departures, high compensation packages and the poor performance of the company's stock, which has fallen 9% in the last year while Google Inc.'s has risen 32%. Google's market valuation of $157 billion dwarfs Yahoo's of $36 billion.

Investors said the meeting was more subdued than last year's. Perhaps, they suggested, Semel was growing resigned to being No. 2 behind Google.

"Terry loves to talk and not say much," Robert Clothier, an investor from Palo Alto, said after the meeting. "But he was less combative than last year. He was really angry about people comparing Yahoo to Google then.

"In response to a shareholder question, Semel said he still had the fire in his belly needed to run the company. "Absolutely," he said. "Yahoo has more opportunity going forward than any other time in its history."

To boost revenue, he said, Yahoo plans to expand its business selling advertising on mobile phones and for other companies' websites, as it already does for EBay Inc., and to keep focus on its search-advertising technology, dubbed Panama. Yahoo trails Google in its ability to generate profit from Web searches.

"If Panama is successful, that's the guts of what will make them competitive with search," said Tony Mezzapelle, an investor from San Jose.

Three independent shareholder proposals were rejected. But, according to preliminary results released by Yahoo, one that would have tied executive compensation to performance received 34.6% of the vote — an indication of unhappiness with Semel's pay. He earned $39.8 million in 2006, mostly in stock options, even as the company's stock fell 35%.

Investors also chastised the directors who approved his compensation package; the company said at least one of the directors received just 66% of the vote even though they all ran unopposed and got 97% approval last year.

"That's a huge drop in approval," said Eric Jackson, a management consultant from Naples, Fla., who has started an online group of disgruntled Yahoo shareholders. "People want a change at the board level."

The other two independent shareholder proposals had to do with setting ethical guidelines for the company's business in other countries. The company faces a lawsuit from family members of Chinese dissidents who claim that Yahoo provided the Chinese government with information about people's online behavior, resulting in arrest and torture.

Yang read a statement defending Yahoo's policies in doing business in other countries and listing initiatives it has started, such as posting an alert on Yahoo in some countries in which governments censor information. "We the employees and executive team at Yahoo are dismayed and distressed by the impact of people imprisoned in China and around the world," he said.

Seeking to highlight Yahoo's achievements, Semel pointed to the success of Yahoo Answers, where people around the world ask and answer questions from one another. Since it launched in December 2005, he said, it has attracted 90 million users.

"Let's take credit for some of the things we did do," he said.

Semel's optimism was convincing to William Ristow, an investor from Ambler, Pa., who said he owned more than 6,000 Yahoo shares. "I leave on a positive note," he said. "They implied that things are moving forward."

Shares of Sunnyvale, Calif.-based Yahoo fell 30 cents, or 1.1%, to $27.05.

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