Yahoo Tries to Heal Itself—Again

The beleaguered Internet portal is reorganizing management ranks in what may be a last chance to prove it should remain independent

by Robert D. Hof

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In the latest attempt to persuade restive investors it can fix itself, Yahoo! (YHOO) is reorganizing its management ranks. The widely expected revamp, unveiled June 26, centralizes product and sales operations under President Sue Decker.

The reorganization comes a day after co-founder and Yahoo CEO Jerry Yang and Chairman Roy Bostock sent shareholders a public letter explaining why the company rejected a deal that would have combined its Web search operations with those of Microsoft (MSFT).

The public statements follow a flurry of management departures in the wake of failed takeover discussions with Microsoft. They also signal Yahoo is ratcheting up efforts to rally support for its independence ahead of an Aug. 1 annual shareholder meeting. Yang, Decker, Chief Financial Officer Blake Jorgensen, and Yahoo directors will take their appeal straight to large investors in a road show due to begin next week.

Little Fundamental Change

In the third major reorganization in the past 19 months, Yahoo consolidated operations under three new groups. Longtime executive Ash Patel, former head of the group focused on the company's underlying technology, will head a new Audience Products Div. responsible for developing new products and services.

Hilary Schneider, former head of its Global Partner Solutions group, responsible for sales and ties with advertisers, will lead all activities for the U.S. A third Insights Strategy group, which will work on a "common strategy for the use of data and analysis" across Yahoo, will get a leader in a few weeks, reporting to Decker. And Yahoo is also revamping its technology operations under Chief Technology Officer Ari Balogh, who reports to Yang.

For the short term, the reorganization presents little fundamental change in Yahoo's top leadership, which has been roiled by high-level defections (BusinessWeek.com, 6/20/08) recently. In the past year, Yahoo has seen the departure of more than 100 managers, including top executives such as Jeff Weiner, former executive vice-president for Yahoo's Network Div., who left last week to work with two venture capital firms, Accel Partners and Greylock Partners.

More Technical Acumen Needed

Although recent departures may have helped force the reorganization, Decker told BusinessWeek it has been planned for months, a claim confirmed by at least one former Yahoo manager. Decker said some executives who would have been shunted to new jobs with less responsibility decided to leave instead. "You're seeing the promotion of a lot of leaders who are very strong in products and technology, which is a different set of skills than the business-and-product mix we had before," she said.