Yahoo's Reorg Goes Down: Less of the Same?

Posted by: Rob Hof on June 26, 2008

Despite advance criticisms involving the words “deck chairs” and “Titanic,” Yahoo today announced the reorganization of its management ranks that had been expected for more than a week. Rising to replace a flurry of recent departures are former head of Yahoo’s Platforms & Infrastructure group, Ash Patel, and former head of its Global Partner Solutions group Hilary Schneider, though there may be more to come. Full release is after the jump, and here’s my full story. BY THE WAY: If any current or former Yahoos would like to offer their views of the situation inside Yahoo, please email me at rob_hof@businessweek.com. I’d love to hear from real people so I can cut through the considerable media noise out there. Thanks.

My initial take: For the short term, this doesn’t look like a fundamental change in management. Yahoo simply had to revamp its management structure after the departure of, well, so many managers, including top execs like Jeff Weiner. However, Yahoo insiders also indicate that the reorg was in the works for months and led some managers whose jobs would have changed substantially to leave.

But the big question, amid increasing shareholder concerns about the stewardship of Yahoo cofounder and CEO Jerry Yang and President Sue Decker, is how much impact this reorg, the third in 19 months, will have in the short term. Meanwhile, reports persist of some kind of quiet talks between Microsoft and Yahoo, possibly over a new and improved search deal that might again scramble the management lineup.

Shareholders appear unimpressed. Yahoo’s stock is down more than 2% following the announcement, though that’s a slightly smaller fall than the overall market. Jeffrey Lindsay, a senior analyst with Sanford C. Bernstein, isn’t impressed either. “We’re struggling to see if it’s going to make any difference,” he told me. “All you’re doing is replacing one ineffective organization with another ineffective organization.”

In particular, he thinks the generally greater centralization under the new organization, especially in technology development, is a negative. I’m not so sure that’s necessarily true, since you can make the case that part of Google’s success is its centralized technical infrastructure that very small product groups can leverage to put out new services quickly. On the other hand, as Lindsay notes, Google’s products aren’t always successful, either.

The other key question is whether this reorg will matter, since Yahoo’s fate remains uncertain even after Microsoft’s failed attempts to buy Yahoo and then to do a more limited search deal. It’s still uncertain whether shareholders are angry enough to vote for Carl Icahn’s proposed board slate, or even whether Icahn will continue to push for the whole slate or just for a minority on the board to avoid potentially costly poison-pill and severance-plan provisions that kick in if there’s a change in control at Yahoo. But if Icahn and other shareholders vote their shares against the current board, the current management seems likely to change at some point as well.

The basics announced by Yahoo: Patel will head a new Audience Products Division and Schneider will head a new U.S. regional group. 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. All of them will report to Decker. More details on other changes are in the release below.

The press release:

SUNNYVALE, Calif.--(BUSINESS WIRE)--Yahoo! Inc., a leading global Internet company, today announced changes to its organization aimed at improving its products, technologies and execution. The moves support its strategy to be the starting point for the most users, the must-buy for the most advertisers and the platform of choice for developers.

Key elements Yahoo! announced are the centralization of consumer product development to enhance the company’s ability to release products worldwide; the creation of a U.S. region focused on bringing products to market for users, advertisers and publishers; formation of an insights strategy team; and enhancements to the technology infrastructure to optimize the use of data and improve coordination between product and engineering teams.

“These moves accelerate the ability of our deep and talented team to build great products, grow our audiences and improve monetization globally,” said Jerry Yang, CEO. “They are designed to put us in an even better position to leverage our leading global audience and capture the opportunity we see in the convergence of search and display advertising.”

Business and Product Changes

The company is creating three new teams that will report to President Sue Decker. An Audience Products Division will assume responsibility for companywide product strategy and product management. It will be led by Ash Patel who previously managed the company’s Platforms & Infrastructure group. A U.S. region with accountability for all go-to-market activity in the U.S. will be led by Hilary Schneider, who previously headed the company’s Global Partner Solutions group. Finally, an Insights Strategy team will assume responsibility for centralizing and executing a common strategy for the use of data and analysis across Yahoo!. The company plans to name this group’s leader within the next few weeks.

“The changes we’re making today will help deliver superior global products for users and enable faster and better decision-making,” said President Sue Decker. “This is a logical next step in light of our success last year in moving to a more centralized approach to developing world-class marketing products. We have planned these changes deliberately over the past several months to clarify responsibilities and to capitalize on the scale advantages while allowing for fine tuning to meet local market needs.”

Technology and Infrastructure Changes

Yahoo! is making changes to its technology organization, led by Chief Technology Officer Ari Balogh, to better position the company to execute on its strategic priorities. Principal changes are developing a world-class cloud computing and storage infrastructure; rewiring Yahoo! onto common platforms; and creating a stronger partnership between product and engineering teams.

“Since my arrival at Yahoo! earlier this year, we’ve carefully evaluated the best possible configuration of our technology group to support our business strategies,” said Balogh. “I’m excited by the depth of our team which—combined with the talent we continue to recruit—will execute even better under this new structure.”

In order to expand its cloud computing capabilities, the Company will form a Cloud Computing & Data Infrastructure Group, charged with developing a computing infrastructure that balances scalability with cost effectiveness. It will move all consumer-facing platform teams to the Audience Technology Group, led by Venkat Panchapakesan. In addition, it is putting new leadership in place behind Yahoo!’s search group, naming Prabhakar Raghavan to direct search strategy and Tuoc Luong as the interim leader of the search product team. Both Prabhakar and Tuoc will also continue in their roles as the leaders of Yahoo! Research and Search Engineering respectively. In addition, David Ku will lead the Advertising Technology Group within Search.

Yahoo!’s Marketing Products Division, Connected Life and Corporate Marketing groups will continue to operate as they do today.

Reader Comments

crude light

June 26, 2008 4:34 PM

Why do Microsoft, true or not, want to buy Yahoo search engine when that is supposed to be the thing that has lost Yahoo business to Google. The other thing that shows my lack of ability to understand this sector, is that to me they seem to be growth wise, not exceptional any longer. So I am mystified at the high earnings ratios enjyed, even now with Yahoo on about 28, and Google on about 36. Neither do I understand how it is that M/S can make Yahoo a company worth what they were prepared to pay for it when the talks were on.
I have a jaundiced view of the world. It's a mad world. Where is logic in the oil price going up even further when Libya say that the market is over supplied which is why they may be shutting down production a bit. Where is logic when I read there are any number of fields waiting to come on in the next few years, bringing the price down to around $80 was the figure mentioned. Where is logic when a reported demand reduction of roughly 2% hasn't dampened down their ardour.
Maybe oil has become like gold, and it will always have a hedge float in the price from now on, but no one seems to have said that, and I don't think I get the impression that is how it is viewed, but perhaps that has changed. If I was in oil right now, I actually would get out of it for a while. Even if I was a speculator things do not seem to strongly indicate a fundamental price hike in the short or medium or long term. But then, I don't see thought, and certainly not hard facts, in speculator behaviour.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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