Bidding Yahoo Adieu

An exodus of high-profile, innovative managers leaves a leadership vacuum, and troubling implications for Yahoo's future

by Catherine Holahan

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Another day, another high-level exit—or four—from Yahoo! (YHOO). The most recent round includes several prominent Yahoos: Joshua Schachter, founder of del.icio.us, the online bookmarking service acquired by Yahoo in 2005; Vish Makhijani, general manager of Yahoo Search; Qi Lu, executive vice-president for search and advertising technology; and Brad Garlinghouse, senior vice-president for communications and communities and the author of a scathing 2006 memo dubbed the "peanut butter manifesto" that accused Yahoo of losing its focus (BusinessWeek.com, 6/12/08).

Garlinghouse and the others are among more than 50 high-profile Yahoo executives and managers who have left the company in the past three months or intend to leave, raising concerns that a leadership vacuum will ensue in light of failed merger discussions with Microsoft (MSFT), and amid withering public criticism of Yahoo management by billionaire investor Carl Icahn. The exodus makes it harder for remaining executives to persuade shareholders the company has the means to turn itself around.

Plummeting Stock Price

Especially troubling about the departures for Yahoo, many of those leaving had been at the forefront of efforts to build promising products and services for the future. Caterina Fake, who joined Yahoo when it purchased Flickr, the photo-sharing site she co-founded, is among those on the way out. She was considered vital to driving innovation at Yahoo. Fake headed Yahoo's Technology Development Group, responsible for overseeing Yahoo's popular "Hack Days," semiannual events that let employees step away from everyday duties and test new products and ideas. Fake also spearheaded the movement to create Brickhouse, Yahoo's San Francisco-based incubator for new, potentially game-changing ideas (BusinessWeek.com, 2/9/07).

Fake's departure, along with that of her husband, Stewart Butterfield, follows news that Jeff Weiner, executive vice-president of Yahoo's Network Div., and Usama Fayyad, Yahoo's chief data officer, have resigned. Fayyad was seen as key to driving new ideas. He developed the strategy instrumental to how Yahoo targeted and personalized advertising. Fayyad, who oversaw Yahoo's research arm, also was responsible for developing new ways to use the Web. In an e-mail, Fayyad said that he will remain with Yahoo until September. "Losing Fayyad is clearly a negative," UBS (UBS) analyst Benjamin Schachter wrote in a June 17 note to investors.

Yahoo played down the importance of the exits. "We have a deep and talented management team across all areas of the company…and we continue to recruit outstanding talent," the company said in a statement. But a steady drumbeat of leaked farewell messages and resignation letters is doing nothing to shore up a stock price that's plummeted 13%, to 22.73, since June 11, when Microsoft reiterated it's not interested in purchasing Yahoo.

The Lure of Smaller Companies

The reasons for the departures are varied. Some who are leaving are dismayed by a planned reorganization being orchestrated by Yahoo President Sue Decker, according to blogger Kara Swisher, who cited unidentified sources. In conversations with BusinessWeek.com, several executives blamed what they see as a lack of management focus and an inability to take the kind of risks necessary to keep pace with a fast-changing Internet landscape. "If you are on the Internet, you have to be fast and you have to take risks," says a former Yahoo who asked not to be identified. "The organizational structure that Yahoo has is completely antithetical to the industry they are in."