Saturday, June 30, 2007

Naples Daily News: Naples Small Investor Led Shareholder Revolt Against Yahoo!

From the Sunday Naples Daily News:

By Laura Layden

Saturday, June 30, 2007

You might call it a Webolution.

It all started back in October when Naples resident and management consultant Eric Jackson wrote about Yahoo! on his personal blog. He questioned the company’s management and the leadership of then-CEO Terry Semel.

He wrote that the rise in the company’s stock price in the first few years after Semel joined Yahoo! in 2001 had more to do with the increased popularity of Internet advertising than with the executive himself -- and that anyone could have done the same job in the same situation.

Little did he know the reaction he would get. E-mails and phone calls poured in from disgruntled investors.

“At the time, there was this huge amount of traffic that came on my blog. I didn’t get that many visitors to my blog and suddenly there was all this interest. People were making comments.
Ninety-five percent were agreeing and frustrated with Semel’s leadership,” Jackson said.
The outpouring of support led him to become a shareholder in Yahoo! and an activist pushing for change.

Observers have credited Jackson for taking down Semel, who stepped aside as Yahoo!’s boss earlier this month. On June 18, Yahoo! announced Semel was out as CEO and that co-founder Jerry Yang would replace him.

The change in leadership came after Jackson, who bought 96 shares of Yahoo! stock in January, led a high-profile campaign to oust Semel and to replace six others on the company’s board of directors as part of what he calls “Plan B.”

“I think a lot of people were dissatisfied, and he just brought a voice that had a lot of weight because he represented the small guy,” said David Neubert, a Yahoo! investor and former Wall Street trader in New York that got behind his campaign. “Representing the small investors gave him more weight than if he was a single investor representing more shares.”

The campaign attracted national attention. The Wall Street Journal, New York Times, Business Week, USA TODAY and the Los Angeles Times picked up on the story. Jackson appeared on CNBC and Bloomberg Television.

“For Bloomberg they sent a truck to where I live in North Naples,” he said. “For CNBC, I had to drive to Fort Lauderdale because there wasn’t a studio in Naples that had a satellite dish to do the uplink.”

He used his blog and YouTube to organize investors to support him.

“I didn’t have any money to do a marketing campaign,” he said.

After reading Jackson’s blog, Neubert pledged his 4,500 shares (worth about $120,000 at the time).

Jackson impressed him.

“You see Carl Icahn do this stuff,” Neubert said. “But you don’t see a little guy like this doing it, and he wasn’t even from the financial world.”

“My hope is that it becomes the wave of the future, and that a lot more individual investors do this,” he said.

The group’s nine-point plan suggested how Yahoo! could turn itself around.

“The company hasn’t been doing particularly well in the last three years, especially in comparison to Google,” Jackson said. “Google’s stock has gone up by about 300 percent, and Yahoo!’s stock has gone down 8 percent, as of a few weeks ago. It has been an underperforming company. It has been a frustrating company to watch as a shareholder.”

Within the first few weeks of posting his interest in driving change at Yahoo!, investors pledged 500,000 shares to his campaign.

“I was surprised at how many current and former Yahoo! employees had contacted me and started expressing interest,” he said.

Today, his group represents 100 individual investors, owning 2.1 million shares (worth about $60 million).

Jackson sent Plan B to the company in February, but the board gave it little notice, he said.
In April, he met with Yahoo! executives in California. But nothing changed, he said.

Now, Yahoo! seems to be paying attention.

At the company’s annual meeting on June 12, more than a third of the stockholders opposed the re-election of at least one Yahoo! director. That rarely happens. It sent a clear message that shareholders weren’t happy and wanted change at the Internet giant.

“I think everyone was very surprised that the vote was as high as it was,” Jackson said.
He attended the annual meeting at the Santa Clara Convention Center in California and asked tough questions of Semel, who at the time appeared to have no immediate plans of leaving Yahoo!.

Jackson demanded to know whether Semel still had the “fire in his belly” to continue on as Yahoo!’s boss.

Semel answered “absolutely.”

Jackson also asked how Yahoo! planned to better compete with Google and grow its display advertising business.

In his speech to shareholders that day, Semel didn’t apologize for the company’s poor performance and Jackson told him he should have.

Semel responded the best was yet to come.

Less than a week after the annual meeting, Semel resigned.

“This is the time for new executive leadership, with different skills and strengths, to step in and drive the company to realize its full potential — it is the right thing to do, and the right time is now,” he wrote in a letter to Yahoo!’s board of directors.

He said there’s “no doubt that, with its new leadership team, Yahoo! will realize its enormous potential.”

Yahoo! seems to be acting on other points in Plan B. The company has stepped up its buy-back program for stock and is looking to reduce overlapping divisions, two suggestions in the plan, he said.

“I don’t expect them to do everything in the plan, but it seems they are following up on several of the points, which makes us happy,” he said. “I think they are on the right track again.”
Jackson, 35, has a master’s and Ph.D. in strategy and corporate governance from Columbia University’s Graduate School of Business in New York.

He owns his own management consulting firm, Jackson Leadership Systems Inc., which his father founded in 1989. Though it’s based in Naples, the company has clients around the country, including cement supplier Lafarge, chemical company BASF and the NBA’s Toronto Raptors.

Previously, Jackson was a vice president of strategy and business development at Web telephone service provider VoiceGenie, now a part of Alcatel. Jackson moved here last fall from Toronto.

This is the first time he’s been involved in an activist campaign. He’s watched others build up their stake in companies to force change. By others he means the likes of billionaire investor and takeover king Carl Icahn, who has made a bid for Bonita Springs-based home builder WCI Communities Inc. and wants to replace the current board of directors with his own slate of officers.

Jackson also has taken cues from Naples’ own Bruce Sherman, an investment consultant who instigated the sale of newspaper giant Knight-Ridder.

The difference is that Jackson is a small investor who used the Internet to organize his campaign.

He even attempted to get elected to Yahoo!’s board of directors, but a technical hang-up kept that from happening.

He’s not stopping at Yahoo! He plans to launch more activist campaigns against other companies.

But he’s not revealing any names yet.

“I’m still researching,” he said. “So we haven’t actually bought the stakes yet.”

With all the publicity from his Yahoo! campaign, he’s been asked if he’s going to create his own hedge fund.

“That might be a spin-off business for Jackson Leadership,” he said. “Hopefully, sooner rather than later. Maybe Naples will become the activist investing capital of the world.”

Sphere: Related Content

Tuesday, June 26, 2007

ISS Governance Weekly: The Power of Protest Votes

From the recent "Governance Weekly" newsletter put out by the ISS:

By Ted Allen, Director of Publications

The resignation of CEO Terry Semel at Yahoo! this week is the latest example of the growing power that investors wield with “withhold” and “against” votes in board elections.

“Shareholders used to be quite reluctant to vote no,” Amy Borrus, deputy director of the Council of Institutional Investors (CII), told Governance Weekly. “Shareholders are becoming more emboldened and more willing to hold directors personally accountable for their performance.”

Semel stepped down June 18, less than a week after at least one director received 34 percent opposition, in part because of a “vote-no” campaign by investor Eric Jackson. The Internet company hasn’t released specific vote totals, but news reports indicate that all board members were elected with at least 66 percent support. That was significantly less than last year, when all the directors received more than 98 percent support.

Jackson and other shareholders complained that Semel’s generous pay package wasn’t justified by the company’s lagging shares, which fell almost 10 percent in the past year, while rival Google's increased by more than 30 percent. In 2006, Semel received an estimated $107.5 million pay package, which included 6 million stock options, according to ISS data.

While the shareholder opposition wasn’t the only reason for Yahoo’s CEO change, the negative votes at the June 12 annual meeting appear to be the final straw that persuaded the board to replace Semel with Jerry Yang, one of Yahoo’s founders. Semel will remain at the Sunnyvale, California-based firm as chairman.

Traditionally, the act of withholding support in an uncontested director election has been viewed by investors as a symbolic protest. While the importance of board elections has increased in the past year as scores of firms, including Yahoo, have adopted majority voting and/or resignation policies, very few directors at U.S. companies ever get more than 50 percent opposition. Last year, just eight directors out of more than 31,000 on corporate ballots failed to receive majority support, according to ISS data.

The vote at Yahoo is further evidence that a significant (but less than a majority) negative vote can prod companies to make management and governance changes. At Home Depot, labor funds and other shareholders withheld more than 30 percent support from 10 directors last year amid criticism of CEO Robert Nardelli's compensation. In January, the company replaced Nardelli and announced several pay reforms.

Last May, the California Public Employees’ Retirement System (CalPERS) and other shareholders withheld 28 percent support from two compensation committee members at UnitedHealth Group. The investors targeted the directors after the health insurance company disclosed that CEO William McGuire held $1.6 billion in unexercised stock options, including options dated when the company's shares were at quarterly lows. McGuire announced his departure in October.

In perhaps the most famous example of a successful vote-no campaign, a coalition of public pension funds and other investors withheld 45 percent support from Walt Disney CEO Michael Eisner in 2004, prompting the board to strip him of his chairman title.

The vote at Yahoo may also persuade other investors at other firms that protest efforts can have an impact. Jackson, who owns 45 Yahoo shares, recalled that his campaign was initially derided by some investors as “futile” and “useless.”

“I do think this is a signal to all shareholders, large and small, that they shouldn't be shy,” Jackson told Governance Weekly. “They should articulate their views.”

Michael Garland, director of value strategies at the CtW Investment Group, which manages labor funds, said a CtW study of 2006 voting found that some large mutual fund companies are starting to vote against directors in certain cases. “It's changing and it's progress,” he noted, which he attributed in part to the funds having to disclose their votes.

Close Vote at CVS/Caremark

In addition to the Yahoo vote, there have been other notable negative votes this season. At CVS/Caremark, Roger Headrick received a 42.7 percent “against” vote amid criticism over his role as a Caremark director in approving the pharmacy-benefits company’s sale to CVS earlier this year. A second director received 33.4 percent opposition.

The CtW Investment Group has called for Headrick's resignation and argues that he would have failed to get a majority of votes cast (which is now required for election at CVS) had uninstructed “broker votes” been excluded. CalPERS has urged the board to “strongly consider” asking Headrick to step down, while CII and North Carolina Treasurer Richard Moore have requested that the company disclose the number of broker votes cast for Headrick.

CVS/Caremark officials, which have said the “broker votes were spread among the votes cast for and against the directors,” have stood by Headrick and not disclosed that number.

CtW's Garland criticized CVS/Caremark for failing to respond to the vote, recalling that Disney's board took action “within hours” of the vote against Eisner in 2004. Given that CVS/Caremark now has majority voting, Garland said the board can't dismiss the vote as a symbolic protest.

“At CVS, the intent was not ambiguous; shareholders knew that they were voting against Headrick,” Garland told Governance Weekly.

Meanwhile, CtW, CII, and other investor advocates are pointing to the close CVS/Caremark vote to build support for a proposed New York Stock Exchange rule to bar broker votes from uncontested director elections. These advocates contend that broker votes are routinely cast in favor of management nominees and “taint the integrity” of director elections.

That rule, which is to take effect Jan. 1, 2008, requires the approval of the Securities and Exchange Commission, which held a roundtable on the issue last month. Borrus of CII said the importance of voting in director elections will only increase if the SEC approves the NYSE rule change. “With the SEC taking action, all these votes on directors will become front and center,” she said.

So far, it’s not possible to determine the full extent of withhold votes this year, since many companies don’t immediately release vote results for specific directors. While firms typically report that every director was reelected, just a few companies provide a detailed breakdown of votes in board elections before filing their quarterly 10-Q reports. Based on the limited results that are available, it appears that many investors are no longer reluctant to use director votes to protest company practices. (On the other hand, some governance observers expect that protest voting will decrease in the future as more firms adopt majority voting and shareholders realize that their votes could bar a board nominee from taking office.)

Compensation Concerns

For the second year in a row, it appears that compensation concerns are generating significant “no” votes. At Occidental Petroleum, six compensation committee members received more than 34 percent opposition amid investor complaints over CEO Ray Irani’s pay package. That negative vote was even higher than last season, when four pay panel members received 20 to 21 percent withhold votes. Irani received a $62 million pay package in 2006; The Wall Street Journal estimated that exercised stock options helped increase his total compensation to $416 million.

Irani also serves on the board at KB Home, where he received 19.3 percent opposition. CalPERS was among the investors that voted against Irani, who chaired the home builder’s compensation committee during a period when stock option grants were improperly dated. Three other directors received withhold votes that ranged from 15 to 19 percent.

Past stock option problems have led to significant shareholder opposition at other companies. At Brocade Communications, investors withheld 42.7 percent support from Sanjay Vaswani, who joined the board in 2004 and now serves on the compensation committee. Former CEO Gregory Reyes went on trial this week on securities fraud charges and is accused of misleading investors about backdated options from 2000 to 2004. Reyes has pleaded not guilty. The company’s board also has not responded to a majority-supported shareholder proposal that seeks to abolish supermajority requirements.

Like Yahoo shareholders, investors have voted against directors at other companies to express concerns that CEO pay doesn’t reflect corporate performance. At homebuilder Toll Brothers, Carl Marbach, who chairs the compensation committee, received a 25 percent withhold vote after the Laborers’ International Union of North America and the Amalgamated Bank mounted a vote-no campaign. The two labor investors complained that CEO Robert Toll received $28 million in 2006, while profits fell almost 15 percent.

At electronics manufacturer Solectron, four pay panel members received more than 26 percent opposition. In 2006, CEO Michael R. Cannon received a 170 percent pay increase, while the company’s shares declined 23 percent.

Failure to Respond to Shareholder Proposals

In recent years, a significant number of shareholders have opposed directors who fail to respond to investor proposals that get majority support. In 2006, directors at five S&P 500 firms received more than 20 percent withhold votes after not acting on majority-backed proposals.

This season, six directors at FirstEnergy received 32 to 42 percent opposition after they failed to implement a shareholder proposal to rescind supermajority voting requirements. That resolution received 73 percent investor support last year and also got majority backing in 2005.
Likewise, two International Paper directors received 25 percent and 38 percent negative votes, respectively, after the company did not adopt annual elections for all directors, as requested by a shareholder proposal that won almost 80 percent support last year.

At Peabody Energy, five directors received 24.2 to 27.9 percent withhold votes after failing to act on a majority-supported proposal that seeks annual elections for all directors.

Other Notable Votes

At apparel marketer Kellwood, Jerry Hunter received a 48.9 percent withhold vote at the company’s June 7 meeting. He was opposed by CalPERS, which questioned his independence and noted that he received a 51 percent negative vote when he last was on the ballot in 2005. Hunter, who serves on the compensation committee, is a partner in a law firm that provided more than $86,000 in legal services to the Missouri-based company last year.

One director at Penn National Gaming received a 36 percent withhold vote, while another had 32.7 percent opposition, according to UNITE HERE, which led a vote-no campaign. The union, which represents hotel and casino workers, opposed three incentive plans proposed by management and criticized the board's maintenance of a “dead-hand” poison pill defense that can't be undone by future directors.

At the New York Times Co., the four directors who are elected by public shareholders received 42 percent withhold votes. Morgan Stanley Investment Management and other investors opposed the directors for a second year to protest the newspaper company’s dual-class equity structure. In 2006, those directors received 30 percent opposition.

Not all high-profile vote-no campaigns received wide support this year. At ExxonMobil, a coalition of 17 institutions, including state pension funds and proponents of socially responsible investing, opposed Michael Boskin, who chairs the company’s public issues committee. While news reports indicated that Boskin received 7 percent opposition, that was less than the 20 percent votes against three compensation committee members last year as investors protested former CEO Lee Raymond's $98.4 million retirement package.

At Verizon Communications, the AFL-CIO and two communications workers' groups waged a vote-no campaign against the compensation committee over the pay received by CEO Ivan Seidenberg. While the company hasn't released specific board vote totals, Verizon did report that all the directors were elected with at least 90 percent support.

Staff Writer L. Reed Walton contributed to this article. Unless otherwise stated, the vote results in this article are drawn from company quarterly filings or press releases.

Sphere: Related Content

Six Reasons Why Yahoo Should Buy Joost

The following post appeared in Seeking Alpha yesterday. Although I don't agree with all the author's points (including that Jerry Yang is only there on a temporary basis or that Yahoo! needs to dress itself up for a sale), I think it's an excellent idea and fits perfectly with Yahoo!'s unspoken strategy of "playing nice" with big content providers. A major acquisition like Joost (and, say, Facebook) would be game-changers for Yahoo! How quickly the discourse would change from discussing Yahoo!'s problems and departing executive to some new swagger in their step.

In light of last week's events, when Jerry Yang replaced Terry Semel as Yahoo's (YHOO) CEO, the company needs to go for some big bets if it wants to stay as relevant in the future as it is now.

Google (GOOG) has already won the overall search war by grabbing 56% market share, compared to Yahoo's 21%. Google has also made an smart move by buying YouTube, as video has clearly exploded in the last 12-18 months. But YouTube is still the wild-wild west of videos, so Yahoo has a great opportunity to legitimizing internet video by buying the emerging online video company Joost.

Here are the top reasons why Yahoo should buy Joost:

1) Joost has already developed an important market position and buzz behind its mantra of "TV anywhere, anytime." It has signed contracts with a whole host of major content providers to stream content on its platform.

2) Joost was started by Niklas Zennstrøm and Janus Friis (Skype and Kaaza founders). These two have enviable track records in building web 2.0 companies

3) Yahoo Videos is going nowhere (compared to YouTube). Yahoo can jumpstart its video story by buying Joost, in a similar manner to what Google did by buying YouTube

4) Joost is in its early stages and is therefore still in beta. As soon as it's available for all, its membership will grow exponentially. Yahoo may be able to buy it now for less than a billion dollars, whereas in 12 months it may have to pony up a much larger sum. (Yahoo lost in not buying Facebook early on.)

5) This move will not only prevent AT&T (T) or Comcast (CMCSA) from buying Joost; it will make Yahoo itself a much more attractive target for AT&T or Comcast, or even for Microsoft (MSFT).

6) By many accounts, Jerry Yang is filling the CEO chair only on a temporary basis, until Yahoo finds a professional CEO. By buying Joost, Yahoo will also acquire Joost CEO Mike Volpi, who has developed his CEO type skills in running large divisions of Cisco.

Sphere: Related Content

Monday, June 25, 2007

Business News Network Interview: Mutiny at Yahoo!

I was interviewed today by former CNBCer Pat Bolland on Canada's Business News Network on the whole Yahoo! "Plan B" Campaign.

Here is a link to the 6 minute interview.

Sphere: Related Content

Friday, June 22, 2007

ZDNet: Will Yahoo's board also get a makeover?

From today's ZDNet:

Will Yahoo's board also get a makeover?

By Stefanie Olsen, and Dawn Kawamoto,
Published on ZDNet News:
June 22, 2007, 4:00 AM PT

After months of criticism, Terry Semel is gone from the corner office at Yahoo, and Jerry Yang is finally back to running the company he co-founded.

But in the aftermath of the executive shakeup at the Internet's No. 2 search site, a big question remains: will the board of directors that recently gave Semel a $71 million yearly compensation package answer for its mistakes as well?

It could happen, despite the outcome of last week's annual Yahoo shareholders' meeting: as unhappy as investors may have been with Semel's compensation, which the Associated Press said was the largest deal received by a chief executive among the 386 publicly traded companies it tracks, the board survived the meeting last week intact.

Many believe the meeting ultimately led to Semel stepping down. Still, the lowest voting percentage any of the 10 board members received was 66 percent, according to Yahoo. The company did not say who got the low vote or break out percentages for each board member.
Also, Semel will still be the nonexecutive chairman of the company.

But that meeting could be just the first act in a long-running boardroom drama at Yahoo. A number of influential organizations, such as the advisers at Institutional Shareholders Services, think a shakeup isn't such a bad idea. ISS has taken Yahoo's board of directors to task for the last two years for Semel's compensation package, asking that it be tied more to the company's performance. But the board argued that the package (Semel has reportedly earned $450 million in six years at Yahoo) was justified in order to retain his talent.

"They just furnished a massive compensation package to Terry and then turned around and terminated his tenure. It begs the question about whether there's some intelligent design behind the program," said Patrick McGurn, executive vice president at ISS.

"Problems on the compensation front can be a window into the boardroom," McGurn added. "A second part of the process could be in looking at succession among the directors."

So how exactly would that happen, and when? Like other public companies, Yahoo is mindful of ISS' recommendations. ISS clients such as pension funds, mutual funds and other institutional investors will often vote their shares in lockstep with recommendations received from ISS. As a result, what the advisers say can greatly sway shareholder votes, especially for companies with a large base of institutional investors rather than mom-and-pop investors.

ISS advised its clients to vote against the re-election of Yahoo's compensation committee: Ron Burkle, managing partner of private investment firm the Yucaipa Companies and friend of former president Bill Clinton; Arthur Kern, co-founder of radio group American Media; and Roy Bostock, former chairman of ad agency BCom3 Group. Burkle and Bostock joined the Yahoo board after Semel in 2001 and 2003, respectively. Kern has been with Yahoo's board since the company was founded in 1995.

Yahoo shareholder Eric Jackson, president of the consultancy Jackson Leadership Systems, believes 7 out of the 10 directors should go, and he wrote as much in a proposal earlier this year. The three members Jackson's group wanted to see remain were Yang, Skyrider CEO Ed Kozel and Vyomesh Joshi, an executive vice president in imaging and printing for Hewlett-Packard.

Calls to Yahoo board members were not returned, but Helena Maus, Yahoo's senior director of corporate communications, sent a statement. The "Yahoo (board) is wholly committed to increasing shareholder value and will be working closely with Jerry Yang and (new president) Sue Decker to help accelerate execution and further strengthen Yahoo's leadership in order to capitalize on the enormous growth opportunities ahead."

But given the negative sentiment on display at the shareholders meeting, the board could remake itself before next year's annual shareholder meeting. One or more of the members could decide to step down, or Yang could nominate new members before 2008.

Majority rulesYahoo's directors are subject to re-election each year, and under changes to the company's bylaws the board enacted in January, the stage is set to allow shareholders to vote a director out of office, even if no opposition candidates are running for that seat.

Under the "majority vote" system, which a number of corporations are increasingly embracing, Yahoo directors are required to draft a resignation letter and have it waiting in the wings. If directors have more "against" and "withhold" votes than "for" votes, they are required to tender their resignation to the board, following the annual meeting.

Although the board's nominating and governance committee, comprised of independent directors, can make a recommendation to reinstate the ousted director, the board would be required to make its final decision public.

"The majority vote is one way companies can show they are listening to shareholders," said Jerry Mucha, proxy manager with proxy solicitation firm Morrow & Co. in Connecticut. "If you have a lot of withholds, or did not act on a shareholder vote that passed, this is one way to show you are listening to shareholders."

Mucha, as well as other proxy solicitors, note that a 33 percent withhold or against vote may be
considered high if shareholders are weighing their decision solely on the financial performance of the company. But if a company has a large percentage of institutional investors who rely on recommendations from proxy advisory firms, then a figure of a 30 percent withhold vote is not uncommon.

Board members who aren't facing any withhold vote recommendations by a proxy advisory firm are typically re-elected with a 90 percent approval margin, said Mucha. Jackson, however, believes the figure is around 98 percent.

Changes to the board can come via a director's resignation and a replacement nominated by the board of directors, or the board can change its bylaws to expand its size. Shareholders can also wage a proxy fight and nominate their own slate of opposition candidates for election at the next shareholders meeting.

Jackson said he had wanted to run for the board earlier this year but wasn't a registered stockholder at the time he filed papers. Whether it's him or not, Jackson wants some fresh perspective.

"The whole board has been guilty of being a little bit complacent," he said. "The board could benefit from some more youth and varied perspective and people who will ask tough questions of Jerry and (new Yahoo President Sue Decker)."

Sphere: Related Content

Global Proxywatch: Shareroots

From today's Global Proxywatch by Stephen Davis (Vol XI No 25):

Maybe you snickered on reading in January about Breakout Performance, a blog operated by Florida investor Eric Jackson (GPW XI-3). Jackson was trying to stir a netroots shareowner rebellion at Yahoo, which he blasted for lagging performance. But he held a mere 96 shares himself. No matter: Jackson swaggered that he'd use "blogging, vlogging, LinkedIn Answers, Flickr mash-up photos, wikis, and polling to force change." You don't have to understand details of what he was talking about. All you need to know is that at Yahoo's June 12 AGM, some 33% of the vote - including lots of institutional investors - agreed with his call to oust certain directors. And within days CEO Terry Semel resigned. Put aside consequences for Yahoo. The bigger lesson is that there's now a formula to unlock potent netroots shareowner activism.

Sphere: Related Content Grass-Roots Activist: Yahoo! Just the Start

From this morning's

To watch the video news clip of this article on TV, click here.

By Brett Arends
Mutual Funds Columnist
6/22/2007 7:16 AM EDT
Click here for more stories by Brett Arends

Look out, high-tech fat cats. Eric Jackson, the private investor and blogger who helped bring down Yahoo!'s (YHOO - Cramer's Take - Stockpickr - Rating) Terry Semel, is turning his sights on other underperforming CEOs.

"I have a list, and I'll be taking action," he tells me. "There are a number of other companies that are ripe for the same kind of approach. This won't end with Yahoo!"

He's naming no names, though he says several of his possible targets are "mid-cap tech companies."

After taking on the board at Yahoo!, which has a market cap of $37 billion, that should be a breeze.

Semel stepped down this week after a remarkable shareholder revolt at last week's annual meeting. The board suffered a major humiliation after one-third of the votes were cast against management on some ballots.

Yes, as with all such issues, Semel's was finally decided by the big institutional investors. And yes, the ultimate factor was Yahoo!'s lackluster performance in the last few years.

But none of that might have coalesced into a coup without the grassroots campaign to bring change.

And what made this revolt unusual was the way small shareholders were able to use blogs, online videos and other "netroots" tools to start the ball rolling and build up momentum.

Thanks to the Web, small shareholders didn't have to sit around in frustration waiting for fat cats to act. They could push things along.

Principal among them was Jackson, a business consultant with his own firm in Naples, Fla. He even made a pitch to other shareholders via YouTube.

Jackson says his campaign techniques weren't just inspired by past proxy battles waged by top financiers but also by recent "netroots" political campaigns. "I took my inspiration from the likes of Carl Icahn, but also from the likes of Howard Dean and Ned Lamont," he said. "We used YouTube and blogs and wikis. We used the Internet and the blogs to come out of nowhere and build support at the grassroots level."

It was a fitting end for Semel. During his tenure from 2001 to 2007, he had missed out on whole swathes of new developments on the Internet, from Google (GOOG - Cramer's Take - Stockpickr - Rating) to Wikipedia to social networking sites such as MySpace. In the end he was brought down by an online revolt he never saw coming.

"I don't think anyone would have predicted this outcome a few months ago," says Jackson. At the start of his campaign, he remembers, Semel's defenders mocked it. "Words like 'feeble' and 'useless' were used," he recalls.

His takeaway from it all now? "In the age of the Internet, the best ideas will rise to the top. It doesn't matter how large or small you are. If you can put together a compelling argument and bring others together, you can have a voice."

The video clip of this article, from TV, is here.

Sphere: Related Content

Wednesday, June 20, 2007

AllThingsD - Voices: A New Day for Yahoo

From today's Voices section of AllThingsD:

(Thanks to Kara Swisher for the invitation.)

A New Day for Yahoo

June 20, 2007
by Eric Jackson
President, Jackson Leadership Systems

I hadn’t expected Terry Semel to step down on Monday. Less than a week before, after Yahoo’s annual meeting in Santa Clara, Calif., he approached me. He was quite affable, considering that we had had a pointed exchange during the earlier Q&A session and that I led a group of 100 shareholders owning 2 million shares who had submitted a nine-point “Plan B” to the company for creating additional value, where point No. 1 was to remove him as CEO. Despite that, he said he was interested in holding a “constructive dialogue” with our group of shareholders. He gave every indication that day that he intended to fight on (with, yes, “fire in the belly”).

Several commentators didn’t think that Yahoo would change all that much following the shareholder vote, partially because Jerry Yang (and also co-founder David Filo) is “not a boat rocker.” (Kara Swisher did acknowledge that she was wrong in this post.) Something obviously had changed between last week’s annual meeting and Monday’s closing-bell announcement. Jerry Yang is the new CEO, with Sue Decker as the company’s president.

In the wake of this news, analysts, commentators and pundits started reading the tea leaves about what the changes signified. Some saw Yang as purely an “interim” CEO who didn’t really want the job. Some said that he was too close to Semel and wouldn’t deviate from the prior strategy. Others inferred that Yahoo was more likely to put itself up for sale (including–surprise–a few investment bankers). One big complaint leveled against Yang was that he’d never run a 12,000-person company before. No, he just helped create and build a 12,000-person company.

As a shareholder, I couldn’t be happier with the leadership moves announced Monday. Yang will be extremely successful in his new role. He wants this now–not for himself, but for the users, employees and shareholders of the company. What’s more, he can and will be successful.

Here’s why: In the weeks leading up to the shareholder vote in Santa Clara, I was contacted by email or phone by almost a dozen current or recently departed Yahoo employees. What’s clear is that Yang and Filo are universally beloved. “David Filo would send out IMs to others on the product/engineering side when some bug turned up at 2 a.m.,” boasted one very impressed ex-Yahoo. Several people asked me: Can we “draft” them to play even bigger roles at the company? They’re getting their wish.

So, let’s go over the case for Yang as CEO:

  1. Nobody knows the business as well as he and Filo do. These two guys are the corporate DNA. When you walk into the lobby at Yahoo, you are inundated with an internally focused marketing/morale-boosting campaign called “We Were; We Are,” complete with black-and-white shots of the early days at the Stanford computer lab, contrasted with colorful modern images of Yang and Filo. They have continued to be intimately involved in the business and know where it needs to go.
  2. He’s already off to a fast start. For a guy who some say was reluctant to take the job, he appeared remarkably energetic in Monday’s analyst call announcing the changes. His instincts and alacrity will serve him well.
  3. He knows how to do deals. Yang architected the very significant partnership with SBC (now AT&T) in early 2001. More recently, in 2005, he did the deal with Critics have pointed to and GeoCities as examples of expensive acquisitions he was involved in that didn’t pan out. This was a different time, however, when Yahoo had a different market cap itself. His instincts were correct (on video and social networking, way before they were seen as “growth” areas). He won’t be shy to do deals in the months ahead, which the company will benefit from.
  4. He’s got the mental strength. It would not have been easy for Yang to go through the last few days leading up to Monday’s announcement. Semel is a friend. Yang wanted it to work. But he was obviously ready to take on this responsibility.
  5. It’s his time. None of us has experience until we get experience. Yang hasn’t run a 12,000-person company, but he’s worked there every day of his professional life. He’s 38, not 25. And he–like Filo–loves this company more than anyone else. More important, though, the two co-founders feel a responsibility for the company. It’s a critical time and Yang’s ready. Back in business school, I took a class in which we read and discussed key passages from Shakespearean plays and the business lessons they taught. Yang reminds me of Prince Hal, the 20-something, fun-loving prince from “Henry IV.” Hal’s father and courtiers worry that he won’t be ready later to ascend to the throne. Yet, when fate calls, Hal closes one chapter of his life and becomes King Henry V–one of the most revered in the monarchy’s history. My sense from watching Yang at the meeting and since then (and the same goes for Filo) is that the flip has switched. These guys are all-in, in a way they haven’t been before.
  6. Sue Decker’s there to help. As a leader, you rely on those around you to help you in areas where you are weaker. Yang’s lucky to have someone as capable as Decker working closely with him.

So, what does this mean for Yahoo’s shareholders? Unlike some, I strongly believe that Yahoo will remain independent. Yang and Filo built this company. They aren’t there to flip it. Yahoo will be much more aggressive in acquiring other companies. And they will look to win on new battlegrounds with Google. It was encouraging to read that they will release the next version of Yahoo! Go (their mobile product) on Friday.

The two most important competitive advantages any company has are its culture and its people. Yahoo’s been blessed with great people through the years, but morale has taken a hit of late. With Yang ensconced as CEO, and with Decker’s and Filo’s support, people are excited again in Sunnyvale. It’s about We Were, We Are, but also what We Will Be.

Eric Jackson is president of Jackson Leadership Systems, a leadership, strategy and governance consulting firm. This year, he led a “Plan B” group of 100 Yahoo shareholders with more than 2 million shares in an Internet-based activist campaign to unlock value at the company.

Sphere: Related Content

ZDNet: Five Steps to a Yahoo! Turnaround

From today's ZDNet:

By Elinor Mills, CNET Published on ZDNet News: June 20, 2007, 4:00 AM PT

After 18 months of floundering, Yahoo finally swallowed a bitter pill Monday and replaced Chief Executive Terry Semel with co-founder Jerry Yang.

But just promoting "Chief Yahoo" Yang and giving Semel a ticket back to his old stomping grounds in Hollywood won't be enough to get the company back on track, Yahoo watchers said in interviews Tuesday. The company has a beast of a competitor in Google and a shaky product lineup. Plus, employee morale is low, and at least one key management position remains unfilled.

"It's clear they have lost mind share and market share to competitors, namely Google, over the last several years," said Derek Brown, an analyst at Cantor Fitzgerald. "Seems to me that they're in a fairly important juncture in their history."

That's not to say it's a lost cause. Yahoo still pulls in gobs of traffic and is one of the best-known brands in the country. And no one knows the company better than Mr. Yahoo himself, Jerry Yang. But the clock is ticking. Analysts, industry watchers and one former Yahoo executive say Yang has to move quickly on five things:

Focus on social media: It seems a bit cliche at this point, but there is no question that social media is hot and Yahoo hasn't done enough to ride that wave. Despite the company's acquisitions of popular photo site Flickr and bookmarking site Delicious and the rapid rise in use of its Answers site, analysts say Yahoo has failed to adequately integrate the services or create a centralized online hub for people to hang out. Yahoo's 360 social network has not been widely adopted, even within the company.

"The social-media space is new growth for the Internet, and Yahoo has properties but none are on par with MySpace, Facebook or even YouTube," said Sandeep Aggarwal, an Internet analyst at Oppenheimer & Co.

Several observers suggested that Yahoo should buy, or at least partner with, Facebook. Last year, Yahoo ignominiously lost, to Microsoft, a deal to serve ads on Facebook and reportedly has declined to offer as much money as Facebook wants to be acquired. Yahoo has conceded that growth for display advertising, its largest business, is slowing, and analysts say many advertisers are being lured over to popular social-networking sites.

"They haven't done a good job of integrating the social media they have now," said Danny Sullivan, editor of the Search Engine Land blog. "Maybe getting something like Facebook would help them."

Added Greg Sterling, principal of consultancy Sterling Market Intelligence, "They need to build a center to their social-media strategy through the acquisition of a social network or blogging platform."

Get better at video: Another hot area where Yahoo is lagging is video, partly for the same reason as social networking--advertisers follow the eyeballs. Google nabbed the prize when it acquired viral video site YouTube for $1.65 billion in stock last year.

Yahoo has stated that it plans to target social networking, video and mobile. "They need to definitely be on the lookout for acquisitions that make sense in those areas," said Eric Jackson, chief executive and president of consultancy Jackson Leadership Systems. "I suspect that Jerry is going to be a little faster to move."

Jackson was the shareholder who challenged Semel at last week's shareholder meeting, saying that Semel owed stockholders a public apology for the company's lackluster financial performance.

Streamline internal structure, processes: With nearly 12,000 employees and so many different products and divisions, Yahoo has become a large, complex corporation that some critics say has difficulty respond quickly to competitive threats, such as Google on search and search advertising. The company could start by axing redundant, overlapping and underwhelming products, like it did by shutting Yahoo Auctions and closing Yahoo Photos in favor of Flickr, Jackson said. Consolidating MyWeb and Delicious might be a start, he added.
"Authority and decision making needs to be pushed down within the organization," Jackson said. "There is a culture that has become apparent where too many managers are quashing ideas that come up from below."

Yahoo also should improve the efficiency of its display advertising business so that it doesn't lose out advertising to sites with lower cost-per-impression rates, like MySpace, said David Card, an analyst at Jupiter Research. "They need to make their internal machinery work better," he said.

Name a chief technology officer: Yahoo needs to fill its open chief technology position, and soon. The spot has been vacant since Farzad Nazem resigned several weeks ago. Given that Yahoo is a technology company, the role is, needless to say, a rather big deal.

"They need to bring in good additional management, someone who has credibility both internally and externally, a hitter CTO," said Ellen Siminoff, former senior vice president of entertainment and small business at Yahoo who is now the chief executive at search engine marketing firm Efficient Frontier. "Or David Filo," who co-founded Yahoo with Yang 12 years ago and as a "Chief Yahoo" is very involved in technical aspects of the company, Siminoff added.

Jackson agreed. "David Filo would be perfect, but I don't know if he wants the job," he said.
"They need to devote more resources to the engineering technology group."

Innovate out of trouble: Yahoo remains one of the top Web sites on the Internet and its e-mail, instant messaging and news services are leaders, but the company hasn't had a real home run in a while with a new product. While Google grabs the headlines and geek cachet with products like Google Earth, YouTube and Google Apps, Yahoo's coolness factor has suffered.

A few months ago Yahoo opened what it calls "Brickhouse," a unit devoted to developing innovative new products, but so far there's been only one release--Yahoo Pipes, an interactive feed aggregator.

"They need to acquire or build a couple of new hits on the product side. Those can either be innovative looks at a new area or hitting a specific demographic group" like women, Siminoff said. "They need to show some innovation, some new product that is different from Google."

Among other suggestions, Sterling said Yahoo must work to restore employee confidence by articulating "a vision people can get excited about." And Yahoo should do what it can to boost its portal status now that AOL and MSN are re-inventing themselves and in flux, said Card.

"Overall, I'm still positive on Yahoo," Sullivan said. "I think you have to have (a company) out there being a counterbalance to Google."

Sphere: Related Content

Bloomberg Opinion: Yahoo's Semel Pays for Performance With Options: Graef Crystal

Graef Crystal is one of the most respected voices on executive compensation in the world. I have followed his works since the late 90s. He came out today with an opinion on Terry Semel's pay, which is below.

By Graef Crystal

June 20 (Bloomberg) -- Terry Semel, who stepped down as chief executive officer of Yahoo! Inc., is one of a handful of U.S. CEOs who really understand what pay-for-performance is all about.

In moving from CEO to non-executive chairman on June 18, Semel gave back to the company 4.5 million of the 6 million- share stock option he received in May 2006. He will get no severance pay, either.

That's the way performance-based pay is supposed to work, which almost all U.S. CEOs simply don't get. To them, if something goes wrong, it is the fault of exogenous events, like higher oil prices or the decisions of the Federal Reserve. They believe they are entitled to high pay during bad times as well as good.

Although Semel's long-term performance had been excellent, the last year to June 18 presented a different picture, with total return dropping to negative 7.4 percent at a time when the return on the Standard & Poor's 500 Index was 25 percent.

More recently, Semel wasn't criticized just for his performance. His pay became an issue, too, with some proxy advisory services urging shareholders to withhold their votes from the three directors who comprise the company's compensation committee.

Why the uproar? On May 31, 2006, Semel was handed the monstrously large option covering 6 million shares and carrying a strike price of $31.59 a share. Yahoo declared the option to have a present value at grant of $63 million. I scored the option a bit higher, $66 million, but who's quibbling.

What made that option all the more galling was that between Dec. 30, 2005, and the date of grant the stock had dropped 19 percent.

Other Things

There are, however, three other things that should be considered when looking at Semel's compensation:

* His 6 million-share option grant carried with it a decision not to grant him any more stock options during a three- year period. So if you amortize that $66 million of present value over three years, the figure drops to a much lower $22 million.

* From 2003 on, Semel hadn't taken his annual bonus in the form of cash. Rather, he was, in 2006, given additional stock options -- 1.3 million.

* Then at the same time he took that giant stock option in May 2006, Semel agreed to cut his base salary to $1 a year from $600,000.

So, Semel effectively went on an all-options diet. Since a stock option is the riskiest form of executive pay, he had one of the most risky pay packages among U.S. CEOs.

Still, even if you charge only a third of that monster option grant to his 2006 compensation, Semel would have turned up in the overpaid column.

Total Pay

Looking at the total pay received by 533 other U.S. CEOs running companies with market values of $4 billion or more, Semel's total pay (after counting only a third of the options' present value) of $34 million positioned him 106 percent above the average. That's after adjusting the average for differences in company size, company total return in 2006 and the degree of risk in the pay package.

You certainly can't criticize Semel for what has come to be known as opportunistic grant timing. The stock didn't take off after the May 2006 grant was made. It declined, and it kept declining. On the day of his resignation, all 6 million option shares were underwater.

Now, when your typical U.S. CEO steps down, he is showered with money, even though the reason for the departure is lousy performance. There is salary and bonus for a number of years, and all the free and option shares that haven't yet vested miraculously become vested.

No Cushion

Semel worked with no employment agreement to cushion his fall, and Yahoo spokeswoman Joanna Stevens said Semel returned to the company ``anything not vested.''

According to the terms of his May 2006 option grant, as detailed in the company's proxy statement filed on April 30, 25 percent of Semel's 6 million option shares vested on May 31, 2007, and the remainder were returned to the company.

As non-executive chairman, Stevens said that Semel will be paid just like any other outside director of the company. In 2006, outside directors received free shares worth $165,000 and a stock option with a grant-date fair value of $159,000.

Semel should be the role model for other CEOs who find themselves in a similar situation.
I take particular offense at the fun poked at him just a week ago by California Governor Arnold Schwarzenegger. Speaking at a dinner with Semel in the audience, Schwarzenegger pointed out that he gave up his multimillion-dollar movie career to work for no salary as governor. Then he added: ``Unlike Terry.''

When Schwarzenegger was in his prime as a movie star, I very much doubt that he worked for a percentage of the net. My guess is that he worked for a percentage of the gross, something for which all movie stars lust. Working for a percentage of the net could cause you to earn nothing if your movie is a turkey.

Well, governor, Terry Semel has always worked for a percentage of the net. And yes, his latest movie has indeed proved to be a turkey, though probably unlike you, he didn't walk away with a pile of bucks.

(Graef Crystal is a columnist for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Graef Crystal in Las Vegas at at . Last Updated: June 20, 2007 00:44 EDT

Sphere: Related Content

Tuesday, June 19, 2007

The Guardian: Founder Yang takes over after Semel quits

From tomorrow's Guardian:

Bobbie Johnson, technology correspondent
Wednesday June 20, 2007
The Guardian

Investors and analysts backed the surprise departure of Yahoo!'s chief executive, Terry Semel, yesterday but gave a mixed response to news of his successor.

Mr Semel announced late on Monday that he was stepping down after six years in the job, after mounting pressure in recent months. In a letter to the board, Mr Semel admitted that "none of us is at all satisfied with the company's recent financial performance" and that he had decided the time was right to step aside.

He will remain on the board as non-executive chairman but has been replaced by Jerry Yang, who started Yahoo! with his fellow college dropout David Filo in 1995. Mr Yang, 38, said that it was "a great honour" to be taking the position, while admitting that the past year had "obviously not been an easy one for us".

But the decision to appoint him to the top job received a lukewarm response from investors and analysts. Some said they doubted whether he had the experience or new ideas to revive the company.

"We would have liked to see a more radical departure from the past but Yang clearly thinks he can turn this thing around," said Ben Schacter of UBS.

The reshuffle also moves the fast-rising executive Susan Decker into a more influential position. Ms Decker, a former Yahoo! chief financial officer who was recently promoted to head of advertising, was widely seen as Mr Semel's successor but will become company president.

Eric Jackson, leader of a group of small shareholder activists, said: "Mr Semel brought much-needed stability to Yahoo! in the early days but we weren't the only ones who were critical over the past three years. I don't agree that Jerry Yang is a stopgap or that he's inexperienced - in the technology industry the founders of any company cast a major shadow."

Mr Semel, a New Yorker who was chairman and chief executive of the Warner Bros studio, was seen as an outsider when he took over at the pioneering dotcom company in 2001. He quickly set about trying to turn Yahoo! into a global media company and under his charge the company expanded from 3,500 staff to 12,000.

However, a series of mis-steps in recent years has seen the share price fall and his fate was sealed by the stifled launch of the much-heralded Panama advertising system last year. Touted as a competitor to Google's immensely successful advertising scheme, Panama was met with muted enthusiasm, putting Mr Semel's position into question among investors.

Sphere: Related Content

AP: Yahoo's New CEO Facing Tough Challenge

From today's AP article by Michael Liedtke:

Yahoo Inc. thinks it's back on the right track now that co-founder Jerry Yang has replaced Terry Semel as chief executive, but analysts and investors already are wondering whether the shake-up is just a prelude to more radical measures, including a possible sale or breakup of the troubled Internet icon.

While Yang promised to rejuvenate Yahoo, Wall Street worried that the Sunnyvale-based company's new boss might too much like the old boss.

Yahoo shares fell 49 cents, or 1.7 percent, to finish Tuesday at $27.63, reversing the positive sentiments initially expressed after the management change was announced late Monday.

"There was some knee-jerk excitement when people first heard the news, but now they are starting to question whether this was change just for change's sake," said Standard & Poor's equity analyst Scott Kessler. "Is this really going to lead to a fundamental change in the way Yahoo sees things and does things?"

The reservations about Yang, 38, primarily stem from his managerial inexperience and ties to Semel.

Although he once ran Yahoo in its very early days, Yang has never been the top executive since the company went public in 1996 and blossomed into a far-flung business with 11,700 employees and more than $6 billion in annual revenue.

What's more, Yang emerged as one of Semel's closest allies during the past six years while serving in his role as "chief Yahoo." He was also a board member who presumably was consulted on some of the key management decisions that left the company a distant second to Google Inc. in the lucrative online advertising market.

"He didn't function as chief Yahoo, so why would you think he will succeed as CEO?" said Global Equities Research analyst Trip Chowdhry. "They already missed the boat and, in the Internet space, there are no second chances."

Chowdhry thinks Yahoo eventually will sell off major chunks of its operations, including e-mail, instant messaging, finance and its photo-sharing service Flickr.

Although he provided few specifics about Yahoo's next move, Yang made it clear in a Monday that he believes the company can remain independent.

Other analysts believe Yang will be able to tackle Yahoo's challenges with the help of Susan Decker, who was promoted to second-in-command as part of the new hierarchy.

"We believe the recent changes at Yahoo are aimed in the right direction," RBC Capital Markets analyst Jordan Rohan wrote in a Tuesday note.

Eric Jackson, a Naples, Fla. management consultant who sparred with Semel at Yahoo's annual meeting last week, said he believes Yang has learned from his predecessor's mistakes and will engineer a comeback.

"It's misguided to think Jerry will do the same thing as Terry just because they were allies," Jackson said. "He has a much better feel for the Internet industry than Terry."

Yang also has more of an emotional and financial stake in a company that he launched in 1995 along with another former Stanford University graduate student, David Filo, who is currently helping to steer Yahoo's technology department.

Combined, Yang and Filo own a 10 percent stake in Yahoo currently worth about $3.8 billion.
Yahoo's inability to keep pace with Google's torrid growth put the company in its current bind. Once the larger of the two companies, Yahoo has been outsmarted by Google at virtually every turn in recent years.

Mountain View-based Google now makes more in three months than Yahoo does in an entire year - a contrast that has been reflected in the companies' respective stock prices. Google's shares have increased by six-fold since their initial public offering in August 2004 while Yahoo's stock price has dipped slightly during the same period.

Yahoo introduced a retooled advertising system in February, but the improvements aren't expected to pay off until later this year. After Yahoo suffered an 11 percent decline in its first-quarter profit, Decker said Monday that the company's second-quarter results may fall at the low end of management projections.

The downturn has fueled speculation that Yahoo might seek a buyer like Microsoft Corp. or consider combining some operations with another major Internet brand like eBay Inc. or News Corp.'s

In his note, Rohan also raised the possibility of Yahoo renewing its attempts to buy Facebook Inc., the second most popular online social networking site behind MySpace. Yahoo approached Palo Alto-based Facebook last summer only to be spurned by the startup's founder, Mark Zuckenberg, who has since indicated his preference to remain independent.

Kessler thinks an outright sale of Yahoo is unlikely because any bidder probably would still have to pay about $40 billion - a steep price even for Microsoft, which also is trying to catch up to Google.

Yahoo seems more likely to prune its operations to try to reduce costs and eliminate some of the bureaucracy that has been blamed for stifling innovation. Kessler believes a large Santa Monica office that Semel opened to house media operations is now a prime target for closure.

Jackson also suspects the Santa Monica office may be shut down as part of Yang's efforts to turn around the company.

"I think he really wants to step up and he won't be afraid to pull the trigger," Jackson said.

Copyright 2007 Associated Press. All rights reserved. This material may not be published
broadcast, rewritten, or redistributed

Sphere: Related Content

VentureBeat: Terry Semel is Out at Yahoo!

From yesterday's VentureBeat:

By Matt Marshall 06.18.07

Terry Semel, who was brought in to turnaround Yahoo after the Internet bust, has stepped down from the top job.

The former Hollywood exec looked like a master initially — when Yahoo’s revenue and profits surged after 2001. There’s no doubt Semel’s steady hand helped. Soon, however, it became clear Yahoo’s performance had more to do with the boom in Yahoo’s search business than with Semel’s guidance. As Google has left Yahoo further and further behind, shareholders like Eric Jackson have increased their criticism.

Jackson wrote this post for VentureBeat more than six months ago, demanding that the board fire Semel. We’re not sure if Jackson’s ensuing campaign has anything to do with Semel’s announced departure today, but his group has been relentless (here’s his blog).

Semel’s massive compensation became a target for criticism. He also appeared out of touch. Underling execs such as Brad Garlinghouse called out for action, producing the famous “Peanut Butter memo” about Yahoo’s malaise.

Jerry Yang, Yahoo’s co-founder, steps in as CEO.

Sue Decker, the former CFO, becomes president. Semel stays non-executive chairman.

Here are more details from Bloomberg news.

Sphere: Related Content

CNBC: Yahoo CEO Resigns

Here's the link to the CNBC report at close of business yesterday announcing Jerry Yang taking over as the head of Yahoo!

Sphere: Related Content

Bloomberg TV: Changes at the Top at Yahoo

Bloomberg-Clip • Jun. 19, 2007. 08:00 AM EST

Sphere: Related Content

Blog 2.0 et Web Marketing: Jerry Yang le fondateur, nouveau directeur de Yahoo

From Vincent Abry's Blog:

Par Vincent Abry, mardi 19 juin 2007 à 07:49 :: internet :: #527 :: rss article consulté 84 fois
Eric Jackson a réussi son coup : faire tomber Terry Semel, le directeur de Yahoo. Terry Semel vient de donner sa démission hier soir. Même si comme le dit Pierre Chappaz il a réussi quelques belles réalisations, je pense que sa place n'était plus chez Yahoo qui ne cessait de plonger face à une concurrence de Google trop forte. Semel gardera un rôle de président mais non exécutif. Susan Decker, vice-présidente de la publicité, devient présidente du conseil d'administration. Voyez plus d'info sur le blog de Jerry Yang.L'action de Yahoo montait de 3% hier soir. Sûrement un beau gap à attendre pour aujourd'hui. En after hours hier soir l'action était à +4.73% avec un volume de 16 000 000 de titres échangés.

Jerry Yang, le nouveau CEO de Yahoo, est l'un des deux fondateurs avec David Filo. Yang est originaire de Taiwan ; il a déménagé à San José aux Etats-Unis à l'âge de 10 ans. A son arrivée Yang ne connaissait que le mot "chaussure (shoe)" bien que sa mère soit professeur d'anglais. Son père est mort alors qu'il n'était âgé que de 2 ans.Il est marié à l'américaine d'origine japonaise, Akiko Yamazaki.Yang siège aussi aux conseils d'administration de Alibaba, Cisco et Yahoo Japon.Sa fortune personnelle est évaluée à 2.2 milliards de dollars. "Février 1994, deux étudiants de Stanford, Jerry Yang et David Filo éditent le "Jerry and David's Guide to the World Wide Web". Un site où ils mettent à disposition des internautes leurs favoris (bookmarks), classés en plusieurs catégories. L'idée d'un guide plus complet leur vient deux mois plus tard. Yahoo, qui n'est alors qu'une start-up, est fondée le 2 mars 1995." (extrait du Journal du Net)

Hummm ca sent bon la nostalgie des débuts de Yahoo tout ca, voyons voir ce que ca va donner !!! "The time for me is right. The time is now. The Internet is still young, the opportunities ahead are tremendous, and I’m ready to rally our nearly 12,000 Yahoos around the world to help seize them." dit Jerry Yang sur son blog. Ce qui peut se traduire librement par: "Le timing pour moi est parfait. Le timing est maintenant. Internet est encore jeune, les opportunités encore immenses, et je suis prêt à rallier nos 12 000 employés autour du monde pour les aider à grandir à nouveau"

Sphere: Related Content

CNET: Yang replaces Semel as Yahoo CEO

From yesterday's CNET:

By Elinor Mills Staff Writer, CNET -->
Published: June 18, 2007, 4:01 PM PDT
TalkBackE-mailPrint Digg this

Yahoo Chief Executive Terry Semel stepped down on Monday and handed the reins of the struggling search company to co-founder Jerry Yang after six years on the job.

Susan Decker, former chief financial officer and head of the advertiser group, has been named president. Semel, meanwhile, will assume the position of nonexecutive chairman and serve as an adviser to the management team and board of directors.

"This is the right thing to do for Yahoo and the right time to do it," Semel said in a conference call with analysts and media.

The shakeup comes nearly one week after a somewhat contentious shareholder meeting in which stockholders criticized Semel's pay in light of the company's lackluster stock price and failure to mount any serious challenge to Google on search and search advertising. Shareholders re-elected the board members with only 66 percent approval, which is low compared with the 80 or even 90 percent approval that is usual. In addition, 34 percent of shareholders voted in favor of a proposal to link Semel's pay with the financial performance of the company.

With the personnel changes, the company is undoing some of the reorganization it initiated six months ago in which it formed three business units: Technology, Audience and Advertising. Now, Decker will oversee Audience, which she previously headed up, and Advertising, whose head had not been named. The Technology group, which has been searching for a unit head since the departure of Chief Technology Officer Farzad Nazem several weeks ago, will report to Yang. Co-founder David Filo will oversee the technology organization until a replacement for Nazem is named.

"The past year has been a difficult one for Yahoo and none of us has been satisfied with the company's financial performance," Semel said in a statement. "As the board and I discussed my future goals and plans I was clear in telling them of my desire to take a step back from an executive role sooner rather than later. We therefore concluded that this is the time for new executive leadership to step in and drive the company to realize its full potential."

Yang and Decker will be an "unbeatable team," he said. Decker is a "strategic powerhouse" and a "financial wizard" and "one of the best business people around," Semel said.

Yang and Decker both sounded choked up in speaking about Semel. "It is an emotional time for us at Yahoo," Yang said. Semel "has not only been a strong leader, he's been a consummate partner…Terry has been a true role model and a mentor to me," he added. "I've learned how to become a better leader and a better person" because of Semel.

Yang credited Semel with re-focusing the company on key priorities after the dot-com bust and helping Yahoo increase its revenue nearly nine-fold to $6.4 billion last year, boosting operating income from a loss to nearly $1 billion and overseeing the number of users grow to more than 500 million and employees to nearly 12,000.

Decker called Semel a "true leader of leaders" and said Yang "really represents the heart and soul of Yahoo."

Yang said he was ready for the challenge of leading the company. "I know the business and market dynamics well," he said. "Yahoo is in the midst of a multi-year transformation…It's imperative that we execute with speed and clarity and discipline," Yang added.

Decker said that while the company's affiliate search business was running slower than expected and growth of its display advertising business had slowed, executives were pleased with early financial returns for the company's new paid search-marketing platform, Panama. "We expect year-over-year growth versus what we saw in Q1," she said. The company's second-quarter revenue will be at the mid-point to the low-end of its previous guidance of $1.2 billion to $1.3 billion, she added. The company reports its second-quarter results on July 17.

Eric Jackson, a shareholder who had told Semel during the shareholder meeting last week that he should apologize publicly for the company's lagging financial performance, said he was pleased with the management changes.

"I think that Semel was the right person at the time he came in in 2001. He did a lot of great things to stabilize the company and set it on its path after the bubble burst, but shareholders were looking for some new blood and direction," said Jackson, chief executive of consultancy Jackson Leadership Systems. "No question, the meeting and the voting results were weighing on the minds of the board and co-founders," he said.

Greg Sterling, principal of consultancy Sterling Market Intelligence, agreed. "I think the public speculation over Semel's fate and future had been getting louder and there was enough discontent at the shareholder meeting to show that that was only going to increase if Yahoo didn't deliver a very solid quarter and perhaps even out-perform," he said. "This may be a mature recognition on (Semel's) part that it is time for a leadership change."

However, Sterling said: "They still have real issues to solve. This takes the pressure off and the distraction around Semel, but now they've got to right the ship."

Yahoo lost its lead in the search market to the younger Google in recent years and watched as Google turned search advertising into a cash cow. Yahoo has only 27 percent share of the search market share compared to Google's nearly 50 percent. Yahoo's stock has dropped about 10 percent from a year ago, while Google's has jumped about 30 percent. Yahoo also took a hit on Wall Street after it reported that first-quarter net profit was down from a year earlier and failed to report any positive effect from Panama. However, the latest news sent Yahoo shares up nearly 3 percent in after-hours trade to $28.12.

Putting to rest any speculation that Yahoo is a takeover target, Semel said: "The board and I believe Yahoo is, and can be, a vibrant independent company."

The Wall Street Journal and New York Post reported in May that Microsoft and Yahoo were in talks on either a merger or a partnership to help them both take on Google. The Journal later reported that the talks were off, but the reports posed the question of whether Yahoo would or should merge to better compete. Analysts concluded that merging with Microsoft would ultimately not be wise for Yahoo.

Sphere: Related Content

WSJ: Amid Missteps, Yahoo's Semel Resigns as CEO

From Today's Page One of the Wall Street Journal:

Company Faces HeatFrom Google, Investors;A Co-Founder Steps Up

By KEVIN J. DELANEY and JOANN S. LUBLINJune 19, 2007; Page A1

The abrupt resignation of Yahoo Inc. Chief Executive Terry Semel, amid mounting investor criticism that the company needs new leadership, reflects the continuing fallout for technology companies now lagging red-hot Google Inc. in crucial areas.

Mr. Semel, 64 years old, is widely credited with helping to focus a foundering Yahoo following his 2001 arrival and helping it ride the recovery in online advertising. The Sunnyvale, Calif., company is one of the largest sellers of such ads, and has played a key role in leading some name-brand companies to increase their marketing on the Web.

In recent years, though, Yahoo has been eclipsed by the success of Google's search-advertising-fueled growth, faced criticism for a lack of management focus and fumbled some opportunities to capitalize on the latest high-growth Internet areas such as video and social networking.

A recent struggle to upgrade its online ad systems to more closely match Google's approach suffered delays, and Yahoo lost executives and failed to fill crucial slots. Mr. Semel had also drawn fire for 2006 compensation that has been estimated by some at $71 million, which critics said wasn't warranted amid the company's declining revenue-growth rates and share price. In all, he has garnered more than $450 million from pay and stock-option exercises since 2001.

With Mr. Semel becoming nonexecutive chairman, Yahoo co-founder Jerry Yang, 38, was tapped to be CEO. Susan Decker, the company's 44-year-old former chief financial officer and head of a key operating unit, became Yahoo's president. Mr. Semel said he resigned the CEO post voluntarily so Yahoo would have "management that's thinking more long-term and that's going to help drive the company into the future."

Now, Mr. Yang and Ms. Decker face the task of steering Yahoo to capitalize on a massive base of more than 500 million users each month and to narrow the gap with Google. The company's strong relationships with advertisers and loyal consumers who use its popular services, such as email and news, will be an asset. But there are signs of further challenges ahead as well.

Ms. Decker said during a conference call with analysts yesterday that Yahoo's results for the second quarter would come in at the low to mid levels of its projections, as slowness in its core graphical-display advertising -- such as banner ads -- outweighs benefits from an ad-systems upgrade it dubbed "Panama."

The executive shake-up could intensify speculation that Yahoo is a candidate for acquisition or other combination. Yahoo in the past year has had conversations of varying intensity with Microsoft Corp., Time Warner Inc. and eBay Inc. about combining at least some of their activities, without reaching any deal, people familiar with the matter say.

"Jerry Yang didn't sound like he wants to sell, though that doesn't necessarily mean the company won't be sold," said Morris Mark of Mark Asset Management, a New York money-management firm that owns Yahoo shares. "Jerry Yang said all the right things for someone who wants to run the business."

Media companies Time Warner and News Corp. recently have separately been considering possible deals to merge their Internet activities with Yahoo, some of those familiar with the situation say, though none of the discussions appear to be advanced. Mr. Yang told analysts during the conference call that his company's board believes Yahoo should remain independent at this point.

"This is a time for new executive leadership, with different skills and strengths," Mr. Semel wrote in a letter to the board released by Yahoo. "We are again addressing challenges created by dramatic changes in the needs of audiences and advertisers," he said, and acknowledged that "none of us is at all satisfied with the company's recent financial performance." But, he said, "Yahoo continues to have tremendous fundamental strengths."

Mr. Yang wrote on Yahoo's Web site that his joint vision with Ms. Decker is "a Yahoo that executes with speed, clarity and discipline." (Read the post.) In an interview, he said, "We see ourselves as having to change to keep pace with the environment, but we also have to differentiate and get ahead of it," suggesting Yahoo would be more aggressive in trying to pioneer services that would set it apart from rivals. Some critics have accused Yahoo of doing little more than following the lead of Google and taking few bold risks of its own.

Exact details of how Mr. Semel came to step down remain in dispute. Mr. Semel formally notified Yahoo directors during an emergency board meeting conducted by telephone Sunday, said one person familiar with the matter. Some board members were surprised by the timing, said this person, adding that the board has discussed plans for Mr. Semel's succession at each meeting over the past year. This person said Mr. Yang's position wasn't designed to be only an interim role, and that "he's going to be in that job longer than people think."

Another person familiar with events said directors conferred off and on informally several times last week before concluding Friday that Mr. Semel should give up the CEO post because Yahoo was "not catching up with Google." However, this individual added that directors currently intend to conduct a search for a new chief executive. Ms. Decker "has the inside track as the internal candidate, but there will be external candidates as well."

Mr. Semel said in an interview that he wasn't pushed out in any way by the board, and that his departure resulted from continuing discussions with directors. "No surprise on our end," Mr. Semel said. "We thought it was the right time to do it." He said indications that the Panama project was yielding positive results played a role in the timing.

Mr. Yang, who co-founded the company in 1995, has had varying levels of involvement with it since then, say people familiar with the matter. In an interview, he said he isn't serving in merely an interim role as CEO.

It isn't clear whether a strong protest vote at last week's annual meeting may have played a role in the management shakeup, though Mr. Semel denies that. Proxy-advisory firms had recommended that investors withhold votes from members of Yahoo's compensation committee. Though Yahoo didn't give the specific vote breakdown, it said the full slate of 10 directors was reelected with at least 66% of the overall vote each.

That relatively high proportion of withheld votes suggests "shareholders want a new direction," said Eric Jackson, a management consultant in Naples, Fla., who owns 96 Yahoo shares. He led a grass-roots drive to oppose the reelection of seven of Yahoo's 10 directors. Yesterday's change in leadership "no doubt will lead to a shuffling at the board" as well, Mr. Jackson predicted.

Since becoming Yahoo CEO, Mr. Semel has reaped huge stock-options packages, even though the use of stock options has lost favor in Silicon Valley. According to a study by compensation firm Equilar Inc., Mr. Semel has realized a total of nearly $452 million in salary, bonus and stock-option exercises since 2001, including $231 million in fiscal 2004, $174 million in fiscal 2005 and $19 million in fiscal 2006.

In addition, Mr. Semel was awarded an additional $71 million in stock options in the 2006 fiscal year, according to Equilar's calculations. Some of that grant has already vested, and Mr. Semel will be able to exercise those options over the next three years, but he may not be able to exercise the unvested options, Equilar says.

The executive changes harken back to the last big shakeup at Yahoo in early 2001. At that time, as the company was reeling from the dot-com meltdown and numerous missteps such as a bungled opportunity to buy Internet auctioneer eBay, then-CEO Tim Koogle left the company and Yahoo said it would search for a new chief executive from outside the company.

The person it ended up selecting in April 2001 was Mr. Semel, the former co-CEO of Warner Bros. He was considered a surprise choice because while he was known as a top handler of Hollywood talent, he wasn't seen as the main operational guru running Warner Bros.

Shortly after his arrival, Mr. Semel identified a few major opportunities, such as overhauling its online-ad-sales efforts. Yahoo laid off staff and allocated more people to core businesses. It shut down activities viewed as nonessential. The payoff was enormous, as online advertising recovered with a vengeance, broadband usage proliferated and Yahoo led the charge. Yahoo's shares rose more than 270% from Mr. Semel's arrival through the end of 2004, but have fallen since then. Revenue rose nearly ninefold from 2001 to its $6.4 billion level last year.

But with Google's rise, it became clear that Yahoo was lagging behind in the fast-growing search and search-advertising markets. Yahoo last year suffered from slumping shares, slowing revenue growth, staff defections and a delay in the crucial Panama project aimed at boosting online ad sales. Executives began fretting that the Internet company's top management wasn't prepared to take the strong medicine they felt was needed. That dissent sprung into public view in November 2006 when The Wall Street Journal published the so-called Peanut Butter
Manifesto by a senior Yahoo executive, calling for big changes.

The company unveiled a reorganization in December and announced the departure of Chief Operating Officer Dan Rosensweig and other executives. Recently, Yahoo has faced competition in its graphical-display advertising business from sites such as social-networking services that have lots of places for ads they can sell at prices far below Yahoo's traditional rates.

"It seems like it's about the second stage of a five-stage rejuvenation for Yahoo," said Jordan Rohan, an analyst at RBC Capital Markets Corp. in New York. He said further stages would have to include overhauling its graphical-display-ad business amid the increased competition.

Yesterday's moves mark a new chapter for Mr. Yang. Until today, his official title was "Chief Yahoo." Mr. Yang recently became interim executive sponsor of Yahoo's technical staff with the departure of the company's longtime chief technology officer, Farzad Nazem. In response to a shareholder question at Yahoo's June 12 shareholder meeting about whether Mr. Yang might serve as permanent CTO, Mr. Semel said, "If Jerry would think hard about being our CTO, I'd be very flattered and very honored."

At the meeting, Mr. Jackson, the shareholder activist, asked Mr. Semel whether he still had "the fire in the belly for this job." Mr. Semel answered, "Absolutely -- I think Yahoo has more opportunity going forward than perhaps any other time in its history."

Ms. Decker's appointment as Yahoo president marks the former financial analyst's continued rise. The role will test her abilities in managing operations, where some believe she needs more experience before she might ascend to the company's top post.

--Gregory Zuckerman, Martin Peers and Matthew Karnitschnig contributed to this article.

Write to Kevin J. Delaney at and Joann S. Lublin at

Sphere: Related Content

USA Today: Yahoo co-founder Yang becomes CEO

From today's USA Today:

By Jefferson Graham, USA TODAY

Yahoo (YHOO) co-founder Jerry Yang on Monday stepped in as CEO at the struggling Internet giant — saying it's not too late for Yahoo to be No. 1 again.

"We have all the assets to win," said Yang, taking over for Terry Semel.

Semel, a former Warner Bros. executive who had been CEO since 2001, had been under investor pressure to resign over his high pay ($71.7 million in 2006) and Yahoo's underperforming stock. Company shares are down 30% since the end of 2005.

At Yahoo's annual meeting a week ago, Semel said he was committed to reviving the company's fortunes. On a conference call Monday, he said, "This is the right thing to do for Yahoo, and the right time to do it."

Semel will remain as non-executive chairman. Sue Decker, who served as executive vice president and head of advertising, was named president.

Eric Jackson, a Yahoo investor who led a shareholder group pressuring Semel to step aside, applauded the move. "There were too many missed opportunities," he says.

Yahoo, once the No. 1 website, has steadily lost ground to rival Google (GOOG), which dominates Internet advertising. Yahoo this year introduced an overhauled search advertising program, but the company has said investors wouldn't see major gains until the end of the year.

Yahoo reported $6.5 billion in revenue in 2006, compared with $10 billion for Google. In the first quarter of 2007, Google announced record profits of $1 billion, compared with $142 million for Yahoo.

"Yahoo had to do something," says Chris Winfield, who runs 10e20, a New York firm that helps businesses run search-marketing campaigns. "I'm hoping Jerry gets in there and really tries to fight to get Yahoo back on top, so Google isn't the only option in town."

Yang started Yahoo in 1995 at Stanford University with fellow grad student David Filo, as a
directory of Internet sites. Filo, who had shared the "Chief Yahoo" title with Yang, will continue working on Yahoo technology, the company said.

Yang said his top priority was reinvigorating Yahoo. "We started with a vision and a dream, and make no mistake, the dream is still alive," he said. "We want to be a better Yahoo."

Yang isn't the only company founder recently to return to the helm. Jeffrey Citron, founder of Internet phone service Vonage, returned as CEO in April; Michael Dell returned to the head of the PC-maker that bears his name in January, after the company fell on hard times.

Investors cheered the shakeup. Yahoo stock rose 4.5% in after-hours trading to close at $29.38.

Contributing: Michelle Kessler

Sphere: Related Content

San Jose Mercury News: Semel ousted in Yahoo shake-up; Yang, Decker step in

From yesterday's San Jose Mercury News:


By Elise Ackerman, Ryan Blitstein and Troy WolvertonMercury News

Article Launched: 06/19/2007 01:29:10 AM PDT

Earlier this decade Yahoo gambled that content and Hollywood would be the key to its success.
Google banked on technology.

Monday's dramatic shake-up at Yahoo, with the ouster of showbiz veteran Terry Semel as CEO and the installation of co-founder Jerry Yang and financial wizard Sue Decker at the helm, is a long-awaited acknowledgment that Yahoo's bet was the wrong one. Yang as chief executive and Decker as president are expected to refocus the Sunnyvale Internet giant on technology.

But is it too late?

While Semel, 64, oversaw a turnaround following the dot-com collapse of 2000, he has been under fire in recent years as Yahoo has been increasingly eclipsed by Google.

After failing to buy Google in 2002, Semel bought advertising technology that had inspired Google's business model - but failed to make integration a top priority until last year. The delay allowed Google to ring up $10.6 billion in advertising sales in 2006 - 40 percent more than Yahoo - while claiming 48 percent of the U.S. search market, compared with 28 percent for Yahoo, according to comScore.

Yahoo at the same time focused on content partnerships, often with the Hollywood studios that Semel used to work with. Google focused almost obsessively on improving its core search technology.

The result: Yahoo's value has fallen by more than 35 percent since early 2006. A delay of new advertising software and a steady exodus of talent have prompted concern that the company has lost its competitive edge.

These numbers prompted Yahoo's shareholders to send Semel a powerful message last week that they didn't believe he was worth his paycheck, which would have been $71.7 million if he had remained at the company.

Even California Gov. Arnold Schwarzenegger took a dig at Semel at a dinner for entertainment honchos held at the Tech Museum in San Jose last week. Schwarzenegger noted that he did not accept a salary as governor "unlike Terry," who was one of the hosts.

In a letter to the board of directors, Semel noted he had desired to step back for some time. "It is the right thing to do, and the right time is now," Semel said. He will continue to serve as chairman of the board of directors.

Yahoo said it will not be paying Semel severance and that he will forfeit any unvested options.
Semel's options, which were worth $71 million in 2006, prompted a shareholder revolt at Yahoo's annual meeting last week. About one in three shareholders voted not to re-elect three members of the board of directors who made up the compensation committee.

Pat McGurn, executive vice president and special counsel of Institutional Shareholder Services, said the vote provided a catalyst for the board to act. "I think this was all about performance," he said.

"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."

Although Yang, 38, has never been chief executive of Yahoo, he has been part of the management team - with the title "chief Yahoo" - since co-creating the site with David Filo in 1994.

"They have got the right guy," said Allen Weiner, an analyst with Gartner who has known Yang for more than a decade. Weiner said having an engineer in charge will help motivate engineers and attract technical talent.

Yahoo's stock jumped almost 3 percent to close at $28.12 after the news leaked. The stock climbed an additional 4 percent in after-hours trading after the news was confirmed.

But some analysts were skeptical that the management change would solve Yahoo's problems, which include weakness in selling advertising on Web sites not owned by Yahoo.

Indeed, Yahoo's woes led the Sunnyvale company to enter into talks with Microsoft, which reportedly drafted a $50 billion offer to buy Yahoo.

David Garrity, research director of Dinosaur Securities, said the management shake-up increases the chances that Yahoo will be bought in the next 12 months.

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

In a conference call with analysts, Yang described Semel as a "true role model and a mentor" who had fostered an open, honest culture. Yang said he had learned to be a better leader - and a better person - by watching Semel.

Yang and Decker endorsed Yahoo's current strategy and said deals with eBay, Comcast and a consortium of 12 newspaper companies, including MediaNews, the owner of the Mercury News, would lead to significant growth in the years ahead.

"Yahoo is a company that started with a vision and a dream, and make no mistake, that dream is very much alive," Yang said during the conference call. "We intend not merely to be a strong competitor but to be an even bigger winner in our industry."

Sphere: Related Content