Revolving door: Yahoo ushers out another CEO

Steve williams

Site Founder, Site Owner, Administrator
By MICHAEL LIEDTKE, AP

SAN FRANCISCO — Yahoo still has credibility issues, even after casting aside CEO Scott Thompson because his official biography included a college degree that he never received.

The troubled Internet company's next challenge will be convincing its restless shareholders and demoralized employees that the turnaround work started during Thompson's tumultuous four-month stint as CEO won't be wasted.

It won't be an easy task, given that Yahoo Inc. has now gone through four full-time CEOs in a five-year stretch marked by broken promises of better times ahead. Instead, Yahoo's revenue and stock price have sagged during a time when rivals such as Google Inc. and Facebook Inc. as advertisers spend more money online.

"Yahoo has been floundering for years and it looks like there is going to at least several more months of indirection now that another CEO is coming in," said Adam Hanft, who runs a consulting firm that specializes in brand reputation and crisis management.

Yahoo's hopes are now resting on Ross Levinsohn as its interim CEO. Levinsohn had a successful stint running Internet services within Rupert Murdoch's media empire at News Corp. before one of Yahoo's former CEOs, Carol Bartz, hired him in November 2010 to help her in her mostly fruitless attempt to fix the company.

Thompson, who was hired as Yahoo's CEO in January to fill a void created by Bartz's firing, had promoted Levinsohn last month to oversee the company's media and advertising services throughout the world.

"This may seem like a great deal of news to digest, but as you are all keenly aware, Yahoo is a dynamic, global company in a dynamic, global industry, so change — sometimes unexpected and sometimes at lightning speed — is something we will continue to live with and something we should embrace," Levinsohn wrote in a Sunday memo to employees that was provided to The Associated Press.

Levinsohn, 48, plans to address workers at a companywide meeting Monday afternoon.

Yahoo tried to make Levinsohn's job slightly easier by reaching a truce with dissident shareholder Daniel Loeb, a hedge fund manager who exposed the inaccurate information on Thompson's bio and had made it clear he would continue to publicly skewer the company unless he was given a chance to help develop a turnaround strategy.

To placate Loeb, Yahoo is shaking up its board of directors, which has been in a state of flux for several months.

Yahoo Chairman Roy Bostock and four other directors who had already announced plans to step down at the company's annual meeting later this year are leaving the board immediately. All five of those directors signed off on the hiring of Thompson, a move that made them all look bad by the recent revelation that they didn't catch an inaccuracy circulating for years about his education.

Three of Yahoo's vacated board seats will be filled by Loeb, and two of his allies, former MTV Networks executive Michael Wolf and turnaround specialist Harry Wilson.

Alfred Amoroso, a veteran technology executive who joined Yahoo's board just three months ago, replaces Bostock as chairman.

The reshuffled board will now try to complete a long-delayed deal to sell part of Yahoo's roughly 40 percent stake in China's Alibaba Group, an investment that investors view as the company's most valuable asset. If a deal can be completed, it could generate billions of dollars that could be returned to Yahoo shareholders and ease some of the pressure on Levinsohn.

Loeb, who controls a 5.8 percent stake in Yahoo though his Third Point hedge fund, had been waging a campaign to gain four seats on the company's board. Loeb settled for a compromise and Thompson's departure. The two had a falling out in late March when Thompson told Loeb he wasn't qualified to be on Yahoo's board.

Although Yahoo gave no official explanation for Thompson's abrupt exit, it was clearly tied to inaccuracies that appeared on Thompson's biography on the company's website and in a recent filing with the Securities and Exchange Commission.

The bio listed two degrees — in accounting and computer science — from Stonehill College, a small school near Boston. After discovering Thompson never received a computer science degree, Loeb exposed the fabrication in a May 3 letter to Yahoo's board. The revelation raised questions about why the accomplishment had periodically appeared on his bio in the years while he was running PayPal, an online payment service owned by eBay Inc.

Yahoo initially stood behind Thompson, brushing off the inclusion of the bogus degree as an "inadvertent error," but harsh criticism from employees, shareholders and corporate governance experts prompted the board to appoint a special committee to investigate how the fabrication occurred.

Thompson, 54, spent much of the past week scrambling to save his job. He sent a memo to employees, apologizing for distractions caused by news of the illusory degree and then sought to assure other Yahoo executives that he wasn't the source of the inaccuracy. He blamed a Chicago headhunting firm, Heidrick & Struggles.

In an internal memo last week, Heidrick & Struggles denied Thompson's accusation. "This allegation is verifiably not true and we have notified Yahoo! to that effect," CEO Kevin Kelly wrote to employees. On Sunday, a spokesman for the firm declined to comment.

The flap over the misleading bio elevated the angst in Yahoo just a month after Thompson laid off 2,000 employees, or 14 percent of the workforce, in the biggest payroll purge in the company's history. In recent weeks, Thompson had been drawing up plans to close or sell about 50 of Yahoo's services while also antagonizing much of Silicon Valley with a lawsuit alleging the rapidly growing social network Facebook stole some of its technology from Yahoo.

"In spite of the very bumpy road we've traveled, we are achieving genuine and meaningful successes in the marketplace every day and heading in the right direction," Levinsohn wrote in his Sunday memo.

Stifel Nicolaus analyst Jordan Rohan thinks Levinsohn's media background may make him better qualified to be Yahoo's CEO than Thompson, whose experience is rooted in electronic commerce.

"Ross Levinsohn is common-sense executive, a pragmatic operator who people love to work for," Rohan said. "He is the right guy for this job."

Yahoo's stock has been sagging since it squandered an opportunity to sell itself to Microsoft Corp. in May 2008 for $33 per share, or $47.5 billion. Yahoo's stock hasn't traded above $20 since September 2008.

The shares ended last week at $15.19, leaving it with a market value of $18.6 billion. That's slightly less than the individual fortunes of Google co-founders Larry Page and Sergey Brin, whose company was still smaller than Yahoo when it went public in 2004.

Facebook founder Mark Zuckerbeg's wealth also could surpass Yahoo's market value depending on the price set in an initial public offering of stock that is expected to be set Thursday.

Yahoo's struggles center on the company's inability to keep up with Google and Facebook in the race for online advertising. Yahoo's annual revenue has fallen from a peak of $7.2 billion in 2008 to $5 billion last year. Over the same period, Google's annual revenue has climbed from $22 billion in 2008 to $38 billion last year. Facebook's annual revenue has increased from $272 million in 2008 to $3.7 billion last year.

"Yahoo has been embattled for such a long time that there are a lot of people prepared to believe the worst about that company," said Post, who specializes in corporate governance and professional ethics. "When you're angry at the management and the board, when nothing's going right and you're losing money, it's understandable that shareholders would adopt an `off with their head' attitude."

___
 
My wife and I coined a term for executives being forced to resign after revelations of impropriety or ethics violations: "getting Hurd-ed to the door." (After former HP CEO Mark Hurd, who seems to have started the latest wave being asked to resign after allegations of sexual harassment arising from a questionable relationship with a female contract employee.) The club now includes:

  • Univ of Arkansas head football coach (inappropriate relationship with student)
  • Best Buy CEO (inappropriate relationship with employee)
  • Best Buy Chairman (for failing to disclose knowledge of above)
  • Yahoo Board Member (led search committee hiring new CEO with fudged credentials)
  • Yahoo CEO (for fudging)

Did I miss anyone?
 
Yahoo has been nonsense for years. They are too linear, always have been and will be, to their grave.
 
This is a company that can't make a good decision to save its life. One mistake after another. How do you hire a CEO without an educational background check? And what kind of CEO pulls that stunt?
 
"What a bunch of yahoos" takes on new meaning?.
 
Reminds me of this story:


A fellow had just been hired as the new CEO of a large high tech corporation. The CEO who was stepping down met with him privately and presented him with three numbered envelopes. "Open these if you run up against a problem you don't think you can solve," he said.

Well, things went along pretty smoothly, but six months later, sales took a downturn and he was really catching a lot of heat. About at his wit's end, he remembered the envelopes. He went to his drawer and took out the first envelope. The message read, "Blame your predecessor."

The new CEO called a press conference and tactfully laid the blame at the feet of the previous CEO. Satisfied with his comments, the press -- and Wall Street - responded positively, sales began to pick up and the problem was soon behind him.

About a year later, the company was again experiencing a slight dip in sales, combined with serious product problems. Having learned from his previous experience, the CEO quickly opened the second envelope. The message read, "Reorganize." This he did, and the company quickly rebounded.

After several consecutive profitable quarters, the company once again fell on difficult times. The CEO went to his office, closed the door and opened the third envelope.

The message said, "Prepare three envelopes."
 
Four CEOs in five years should be a clue: It's not the CEOs.

Tim
 
Great point. Where's the vision?
 
It's evidently not sitting on the board. I have no idea what kind of CEOs they're hiring, but I've got a pretty good clue that they're not letting them do the job. Or maybe they're hiring the wrong people and giving them the wrong job to do. But at this point, something else is wrong besides the trail of guys sitting in that office.

Tim
 

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