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Yahoo's Day After (Semel Out, Yang In)

Tuesday, 19 Jun 2007 | 11:11 AM ET
Yahoo! co-founder Jerry Yang smiles as he watches the Stanford basketball game against Washington State, Thursday, March 3, 2005 in Stanford, Calif. Yahoo! celebrated their 10th anniversary this week. David Filo and Yang founded Yahoo! as doctoral students at Stanford. (AP Photo/Paul Sakuma)
Paul Sakuma
Yahoo! co-founder Jerry Yang smiles as he watches the Stanford basketball game against Washington State, Thursday, March 3, 2005 in Stanford, Calif. Yahoo! celebrated their 10th anniversary this week. David Filo and Yang founded Yahoo! as doctoral students at Stanford. (AP Photo/Paul Sakuma)

Yahoo's next chapter begins today with a "what's old is new again" approach. Yahoo co-founder Jerry Yang moves into the C-suite; and Susan Decker moves next door as the company's president. And with a few hours under our belts to digest Terry Semel's departure, it gives us some opportunity to look ahead at what's next for this company.

Wall Street's biggest worry seems to be that this reorganization will mirror the one Yahoo went through in December: Everybody seemed to take on new roles and COO Dan Rosensweig and Sr. VP Lloyd Braun lost their jobs. Essentially, jobs shifted but the strategy seemed to stay in tact.

Now, Semel loses his job, and Yang and Decker take on new roles, but the strategy seems to be set, as indicated on the conference call yesterday.

Says Semel: "A lot of work we did to this point is starting to pay off now. We mentioned Panama. They're talking about the reorg we engaged in and the partnerships that we've created and and saw it as a great opportunity to have continuity rather than to try and start something all over again. That continuity is Jerry and Sue as we go forward."

Says Decker: "We believe that our open approach to advertising has the promise of driving more value for advertisers, agencies, ad networks, publishers and users than any other mechanism."

But if the strategy hasn't worked to this point, and the company cops to revenue expectations on the second quarter at the mid-range to low-end of estimates, then why the emphasis on continuity?

"To be honest with you, when we saw the news Terry Semel was stepping down, we thought perhaps they would announce an outsider coming in, or they would have an interim label on someone like Jerry Yang," says S&P's Scott Kessler. "The fact he's coming in as the full CEO, we're not sure how long that is going to last. Importantly, as much as people are talking about Jerry Yang and Sue Decker being new blood, they've both been with the company the entire decade. We don't see a huge amount of change coming as a result of this move."

The other issue is leadership. Yang has been a technological visionary and enjoys cult-hero status within the Yahoo community. Both are good things, especially now that Yahoo is searching for a CTO after the recent surprising and sudden departure of Farzad Nazem. But the company seems to need a broader vision. New markets, new products, new partnerships. A new strategic focus.

"We need a change in strategy no matter what Jerry Yang says publicly," says RBC Capital's Jordan Rohan. "They need to figure out social media. Facebook. MySpace. That where the growth in the internet audience is today. And that's something that Yahoo doesn't have enough of. They've tried some endeavors in that area, and they just haven't won yet."

Nor have investors.

Big institutions and the retail investor have been patient with Yahoo these past 24 months. But for how much longer from here forward? Yahoo is at a crossroads. It seems a partnership with another company makes all the sense in the world. Our David Faber has mentioned just about every big player out there as considering a play for the company: News Corp , Microsoft ,AT&T ,Comcast , eBay ,Time Warner . But of course these companies would be examining a Yahoo option. Who wouldn't want the 400 million eyeballs this company attracts every month.

But when a company like Yahoo trades at a competing multiple to Google, and it's growing 4-times slower, that makes Yahoo unreasonably expensive. It's kind of like shoppers wandering in into a Ferrari dealership and a Pontiac is parked right there on the lot. And ALL the cars carry the same price tag. Yeah, shoppers will walk by, look at the pretty cars, laugh at the Pontiac, and keep walking.

The biggest worry for Yahoo is that suitors will take a look, laugh, and keep walking. Yahoo's uphill climb has only just begun.

Questions? Comments? TechCheck@cnbc.com

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