SAN FRANCISCO – Yahoo Inc. on Tuesday announced a reorganization that marks Chief Financial Officer Susan Decker as a potential successor as CEO and simplifies its structure as it battles faster-growing rival Google.
Decker, 44, will take the lead of a new unit focused on advertising, which is Yahoo’s main source of income but has also seen growth slow in some areas. Media, communication, and other product groups will be merged into a unit focused on marketing and international businesses.
Chief Operating Officer Daniel Rosensweig, a possible rival to Decker for the mantle of successor to Chief Executive Terry Semel, will leave the company in March.
Also leaving is Yahoo Media Group chief Lloyd Braun, a former ABC TV executive hired two years ago to help Yahoo blend its Internet services with Hollywood-style showmanship.
Ushered in to help the company define a new hybrid that blended Hollywood and Silicon Valley, Yahoo was caught out by the explosive rise of video-sharing phenomenon YouTube, which was recently bought by Google Inc. for $1.65 billion.
“This is just the beginning of what Yahoo needs to do,” said RBC Capital Markets analyst Jordan Rohan in New York.
“It may take all of 2007. Change like this is evolutionary, not revolutionary. The new division heads will need time to grasp the enormity of the task at hand.”
A spokeswoman said Yahoo does not publicly discuss its succession plans. Semel, 64, who is also Yahoo’s chairman, has no plans to leave the company and is re-energized by the changes under way, she said.
Shift in ad market
Yahoo, a 12-year-old Internet pioneer, has struggled with a shift in the online ad market as corporate advertisers chase younger customers on new social networking sites such as MySpace and YouTube.
In its latest quarterly results, Yahoo posted a 37 percent drop in quarterly profit, prompting Semel to say he was not satisfied with the financial performance of the company.
Google, by contrast, said its profit nearly doubled as it tightened its grip on the online search market.
Shares of Yahoo are down about 30 percent this year, while Google shares are up about 17 percent.
Some of the details of the reorganization were prefigured in an internal memo written in October and leaked out in November, which was dubbed the “Peanut Butter Manifesto”.
The memo argued Yahoo’s investment strategy was like spreading peanut butter too thinly on bread — and argued for “radical reorganization” and job cuts of 15 percent to 20 percent of Yahoo’s 10,000 employees.
Yahoo said on Tuesday that no layoffs were planned in the restructuring. “As far as layoffs go, we are absolutely organizing for growth,” Semel told Reuters in an interview to discuss the moves. “We continue to hire.”
The company is reorganizing into two business segments: Audiences, which will oversee search, media and communication products and services, and Advertisers and Publishers, which makes money from ads aimed at the audiences. Yahoo’s e-commerce business will join the ad group.
Decker, who will head the latter, was a top-ranked Wall Street media analyst, who joined Yahoo in 2000. She has emerged as one of Silicon Valley’s most high-profile woman leaders.
As Yahoo moves to serve customers not only within its own network of properties but also via partnerships on other online properties, the need to restructure grew apparent, Semel said.
He pointed to high-profile advertising and Web services partnership deals Yahoo has struck in recent months with online auctioneer eBay Inc., 170 U.S. daily newspapers and mobile phone powerhouse Vodafone in Britain.
RBC’s Rohan argues that Yahoo faces less competition from Google, but, like Google, it must become more nimble in order to grasp emerging opportunities on the Internet, where two- or three-year-old companies frequently set the industry’s agenda.
“The competition with Google in search is done. Google won,” Rohan said. “But Yahoo has a real audience advantage in everything except Web search,” he said of its vast audiences for e-mail, instant messaging, news and other properties.