Thursday, January 15, 2009

WSJ: Departing Yahoo President Has History of Missteps

From The Wall Street Journal

JANUARY 14, 2009, 10:02 P.M. ET


On Monday night, outgoing Yahoo Inc. Chief Executive Jerry Yang delivered some tough news to Yahoo President Susan Decker: The Yahoo board had picked someone else as its new CEO. On Tuesday, Ms. Decker announced her plans to resign from the company whose ranks she scaled rapidly during her nearly nine-year tenure.

Her exit caps more than a year of stumbles, during which Ms. Decker -- a well-regarded finance whiz and strategist -- failed to execute her plans. Among other things, she planned multiple reorganizations and growth strategies to get Yahoo back on track, only to see few of the initiatives bear fruit. She also played a significant role in advising Yahoo's board to reject Microsoft Corp.'s offer to acquire it last year, a move that incited Wall Street's ire.

Carol Bartz, a Silicon Valley veteran who got the CEO job Tuesday, and several other external CEO contenders "happen to be better athletes than Sue," says one person familiar with the matter, who notes Yahoo directors wouldn't have considered outside CEO candidates "if she (Sue) was a great president." But "sometimes, CFOs don't make great presidents."

Ms. Decker's fall from grace is all the more eye-catching because she had once been viewed as a near shoo-in for Yahoo CEO. The onetime Wall Street analyst catapulted from chief financial officer to head of Yahoo's advertiser business to president in 18 months. She had sealed several high-profile deals, including an ad deal with eBay Inc. several years ago and Yahoo's purchase of ad-technology company Right Media Inc. And she had pushed the development of Yahoo's new search-advertising system Panama, which was delayed but is now showing results.

It's unclear where Ms. Decker will go next. "She would like being a CEO but there are other things in life she likes, too," says Warren Buffett, chairman and CEO of Berkshire Hathaway Inc., where Ms. Decker is an outside director. He added that he doesn't plan to hire her into Berkshire because he likes her work as a board member too much.

Many of the challenges that Ms. Decker ran up against at Yahoo -- such as questions over the company's strategic direction and her financial background in a company founded by engineers -- may end up dodging Ms. Bartz as well. One person close to Ms. Decker said her expansive knowledge of Yahoo's business would have made her an excellent CEO if given the chance. Ms. Decker declined interview requests through a spokesman.

Ms. Decker joined Yahoo as its chief financial officer in 2000 following 14 years in equity research for investment bank Donaldson, Lufkin & Jenrette. At Yahoo, she quickly she won over Wall Street with her sharp mind and focus on cash flow. Over the next few years, she sought and was given more management experience.

In mid-2005, Yahoo's then-CEO Terry Semel handed Ms. Decker responsibility for sealing a sweeping ad-sharing agreement with eBay that would move Yahoo into the business of selling ads on other Web sites, not just its own. Ms. Decker pushed a deal through in intimate meetings with Mr. Semel and eBay's then-CEO Meg Whitman, say people familiar with the negotiations.

In December 2006, Mr. Semel rewarded Ms. Decker by tapping her to run one of Yahoo's two major business units, the advertiser and publisher group. Yahoo's then-chief operating officer Dan Rosensweig resigned in the reshuffling. Employees began whispering that the CEO job was Ms. Decker's to lose.

At the same time, however, Yahoo was facing more challenges. Google Inc. continued to expand its share of the online ad world through search ads, stealing Yahoo's thunder in the market. Yahoo's stock price sank. In June 2007, Mr. Semel resigned and Mr. Yang took over the CEO job. Ms. Decker was appointed president.

In her new role, she soon intimidated managers with how quickly she could pick up the nitty-gritty numbers of their business and spot flaws in their financial models without picking up a pencil, say Yahoo employees. She inspired employees with a company-wide presentation about Yahoo's potential in mid-2007, predicting the stock would soar if the company increased traffic a little and pricing a lot, according to people who attended.

But Ms. Decker struggled to turn that theory into practice. In mid-2007, she pushed a new business decision-making framework called RAPID, which stood for "recommend, agree, perform, input and decide." She required managers to fill out grids assigning employees to each letter for decisions ranging from who could veto an ad or set a privacy policy. The ordeal irritated employees, who turned the phrase "Who's the D?" into a company-wide joke.

In late 2007, Ms. Decker stepped back into her comfort zone when Mr. Yang asked her to devise a three-year financial plan to boost the board and investors' confidence. The plan projected Yahoo would grow revenue 25% in both 2009 and 2010, well above analysts' estimates of 13% and 11% growth, respectively.

The exercise took on new urgency after Microsoft made a $45 billion bid for Yahoo last January. Yahoo rejected the bid as too low.

Ms. Decker, Mr. Yang and other Yahoo executives took to the road to defend their three-year plan in March 2008, facing heat from shareholders and analysts who had picked it apart. "The analyst community had a really tough time making sense of the numbers," says Ross Sandler, an analyst with RBC. Employees also questioned the model's assumptions -- including that Yahoo could nearly double its share of the display market, according to people familiar with the plan.

Back in Sunnyvale, Calif., in early 2008, Ms. Decker created two task forces. One was dubbed Judo to review Yahoo's advertiser strategy. The other was called Aikido to review the company's consumer products strategy. The mission was to determine whether Yahoo should think of itself as an advertising or consumer business, according to people familiar with the process. In an initial vote, advertising won, say these people.

But after months of presentations, Ms. Decker concluded the company should stick to its strengths and the consumer lens, while innovating in advertising as well. Some claimed it wasn't decisive enough and that the whole experience was a waste of time.

Around the same time, Ms. Decker embarked on an ambitious corporate reorganization designed to rethink how the company builds products. The plan -- which created different geographic product regions and a central product management group to service them -- broke apart the powerful group that had been previously in charge of running all of Yahoo's consumer products, from Yahoo Finance to Yahoo Mail.

Some executives started to catch wind of the plan in May 2008. At the same time, activist investor Carl Icahn, who had built up a big stake in the company, announced his campaign to replace the Yahoo board.

When Jeff Weiner, Yahoo's executive vice president for consumer products, announced he wanted to leave in June 2008, Ms. Decker was forced to rush out the details. Several other senior executives also resigned. "Change produces change," Ms. Decker said in an interview at the time.

By now, Yahoo's stock price had sunk to around $20 a share, down from around $30 in February, after Microsoft's offer. Yahoo, crippled by a proxy battle, was also facing shareholder lawsuits over its handling of Microsoft's acquisition offer.

At a tense annual shareholders' meeting in August 2008, weeks after Mr. Icahn settled his attempt to topple the board and replace Mr. Yang, Ms. Decker found herself in the hot seat. Investor Eric Jackson, founder of Ironfire Capital, took the microphone and challenged the hours Ms. Decker spent in meetings on three outside boards. How are "these extra 168 hours a year best serving our company?" he asked.

Yahoo's Chairman Roy Bostock piped up to defend Ms. Decker as the hardest-working executive he knew. Ms. Decker said she had learned a lot from all these companies, citing how she had applied supply-chain knowledge from Costco to Yahoo.

In the fall, as the economy collapsed, Ms. Decker's attention turned to more cost-cutting and reshuffling. Mr. Yang began discussing his willingness to step aside with board members, say people familiar with the process. On Nov. 17, Yahoo announced they were commencing a search to replace him.

When Yahoo board members began their search, they brushed aside a hefty list of candidates from recruiting firm Heidrick & Struggles International Inc. for a shortlist of names of executives with experience running public companies. They also considered Ms. Decker as the internal front-runner, according to people familiar with the process.

At a meeting on Dec. 4 at Yahoo's headquarters, board members discussed external candidates and Ms. Decker. Outside contenders then included Ms. Bartz, Arun Sarin, a former chief executive of Vodafone Group PLC who later withdrew from consideration, and Bill Nuti, NCR Corp.'s president and CEO, say people familiar with the matter. An NCR spokesman declined comment Wednesday. Board members focused more on outsiders than Ms. Decker because they already dealt with her regularly, according to one informed person.

Ms. Decker sat for interviews with most of Yahoo's 11-person board, according to people familiar with the matter. She told some people she felt they went well, according to two familiar with the matter, but she wasn't sure where in the board's estimation she sat. On Monday night, she found out.

In a farewell email to employees, Ms. Decker said she did not make the decision to leave "lightly," according to her memo. "I want to congratulate Carol on her new role and put my full support behind her," it read. "I would ask that you all do the same."

Write to Jessica E. Vascellaro at and Joann S. Lublin at

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