U.S. News

Analysts Mixed on Changes at Yahoo


A management shakeup at Yahoo! awards a key role to Chief Financial Officer Susan Decker, marking her as a potential successor to Chief Executive Terry Semel.

The reorganization, announced late Tuesday, is aimed at simplifying the company's structure as it battles Google and smaller, more nimble rivals and tries to reinvigorate its growth.

"We think it’s a great way to organize ourselves and we think we’ll be positioned for a lot more future growth," Semel told CNBC's Maria Bartiromo in an exclusive interview on "Closing Bell."

Semel also said he has no plans on stepping down

“I’m having a great time, so I’m not going to leave,” he said. “I think this is a great opportunity for Yahoo and a great time to shine.”

Mixed Reaction to Changes

Analysts, however, were mixed on the shakeup.

"The management change is a positive direction," said JP Morgan Internet Analyst Imran Khan, appearing on CNBC's "Street Signs." "We are glad to see that senior management is recognizing the issues with the business. However, we are remaining neutral because we are not very optimistic. We think the estimates for 2007 are very optimistic."

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, which was bought by Google.

Banc of America analyst Brian Pitz said it appears Yahoo is increasingly trying to morph into a clearinghouse for online advertising, akin to Google's AdSense.

I think people actually wanted more, but I think folks are going to think this is a very positive first step," said Scott Kessler, an Internet software and services analyst at Standard & Poor's on CNBC's "Squawk Box."

"Susan Decker is a very accomplished executive," Kessler said. "She not only has experience running the financials of Yahoo!, but she actually covered the media industry (as an equity analyst). Her new role in an operational capacity, I think, is an indication she is going to take a bigger role going forward."

"Decker, 44, will take the lead of a new unit focused on advertising, which is Yahoo's main source of income. Media, communication, and other product groups will be merged into a unit focused on user activities.

Sources told CNBC's Jim Goldman that Lloyd Braun, head of Yahoo's media and entertainment group, was asked to leave the company on Tuesday morning after Yahoo first suggested he take a lesser role. Senior Vice President John Marcom, who ran Yahoo's International Business operations, also was asked to leave.

Yahoo also announced that Chief Operating Officer Daniel Rosensweig, once considered a rival to Decker to succeed Semel, will leave the company in March.

Forming Three Groups

The company is reorganizing into three operating groups: Audiences, which will oversee search, media and communication products and services; Advertisers and Publishers, which makes money from ads aimed at the audiencesl; and a Technology Group led by Chief Technology Officer Farzad Nazem.

Decker, who will head Advertisers and Publishers - the company's primary revenue engine - is a former top-ranked Wall Street media analyst who joined Yahoo in 2000. She has emerged as one of Silicon Valley's most high-profile women. She will continue as finance chief until the company finds a successor.

The changes still leave key roles vacant, including Decker's former chief financial officer position.

According to Kessler, Yahoo! has a deep bench from which it can fill these positions, but he wouldn't be surprised if the company reached outside its ranks.

"Possible Takeover Target

However, if this attempt fails to jumpstart growth, some wouldn't be surprised if Yahoo found itself on the block. UBS analyst Benjamin Schachter sees Microsoft as a likely suitor.

"If...you're sitting in Redmond and you're a year post-Vista, and a year-and-a-half post-Ad Center, I don't think there is big movement from Microsoft one way or another in terms of their position with online advertising," Schacter said on CNBC's "Morning Call." "What choice do they have? If they want to make a big move, there is only one company that fits the bill, and that's Yahoo."

In its latest quarterly results, Yahoo posted a 37% 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% this year, while Google shares are up about 17%.

Some of the details of the reorganization were predicted in an internal memo written in October and leaked out in November, which was known as "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 between 15% to 20% of Yahoo's 10,000 employees.

But the company said no layoffs are 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."