Revolving door: Yahoo ushers out another CEO

In this March 17, 2010 photo, then Pay­Pal pres­i­dent Scott Thomp­son speaks at the company’s inter­na­tional head­quar­ters in Sin­ga­pore. Thomp­son, named CEO of Yahoo in Jan­u­ary, report­edly will step down Sun­day, May 13, 2012 amid con­tro­versy over men­tions on his resume and in reg­u­la­tory fil­ings of a com­puter sci­ence degree he never received. Yahoo says it is appoint­ing Ross Levin­sohn as interim CEO and Fred Amoroso as chair­man of its board, effec­tive imme­di­ately. (Asso­ci­ated Press File | Wong May-E)

MICHAEL LIEDTKE

AP Tech­nol­ogy Writer

SAN FRANCISCO — Yahoo still has cred­i­bil­ity issues, even after cast­ing aside CEO Scott Thomp­son because his offi­cial biog­ra­phy included a col­lege degree that he never received.

The trou­bled Inter­net company’s next chal­lenge will be con­vinc­ing its rest­less share­hold­ers and demor­al­ized employ­ees that the turn­around work started dur­ing Thompson’s tumul­tuous four-month stint as CEO won’t be wasted.

It won’t be an easy task, given that Yahoo Inc. has now gone through four full-time CEOs in a five-year stretch marked by bro­ken promises of bet­ter times ahead. Instead, Yahoo’s rev­enue and stock price have sagged dur­ing a time when rivals such as Google Inc. and Face­book Inc. as adver­tis­ers spend more money online.

“Yahoo has been floun­der­ing for years and it looks like there is going to be at least sev­eral more months of indi­rec­tion now that another CEO is com­ing in,” said Adam Hanft, who runs a con­sult­ing firm that spe­cial­izes in brand rep­u­ta­tion and cri­sis management.

Yahoo’s hopes are now rest­ing on Ross Levin­sohn as its interim CEO. Levin­sohn had a suc­cess­ful stint run­ning Inter­net ser­vices within Rupert Murdoch’s media empire at News Corp. before one of Yahoo’s for­mer CEOs, Carol Bartz, hired him in Novem­ber 2010 to help her in her mostly fruit­less attempt to fix the company.

Thomp­son, who was hired as Yahoo’s CEO in Jan­u­ary to fill a void cre­ated by Bartz’s fir­ing, had pro­moted Levin­sohn last month to over­see the company’s media and adver­tis­ing ser­vices through­out the world.

“This may seem like a great deal of news to digest, but as you are all keenly aware, Yahoo is a dynamic, global com­pany in a dynamic, global indus­try, so change — some­times unex­pected and some­times at light­ning speed — is some­thing we will con­tinue to live with and some­thing we should embrace,” Levin­sohn wrote in a Sun­day memo to employ­ees that was pro­vided to The Asso­ci­ated Press.

Levin­sohn, 48, plans to address work­ers at a com­pa­ny­wide meet­ing Mon­day afternoon.

“The bot­tom line is that the sit­u­a­tion at Yahoo is a mess,” Mac­quarie Secu­ri­ties ana­lyst Ben Schachter wrote in a Mon­day research note. “It remains unclear how the new man­age­ment will turn things around at Yahoo.com and how quickly yet another new strat­egy can be formulated.”

Yahoo tried to make Levinsohn’s job slightly eas­ier by reach­ing a truce with dis­si­dent share­holder Daniel Loeb, a hedge fund man­ager who exposed the inac­cu­rate infor­ma­tion on Thompson’s bio and had made it clear he would con­tinue to pub­licly skewer the com­pany unless he was given a chance to help develop a turn­around strategy.

To pla­cate Loeb, Yahoo is shak­ing up its board of direc­tors, which has been in a state of flux for sev­eral months.

Yahoo Chair­man Roy Bostock and four other direc­tors who had already announced plans to step down at the company’s annual meet­ing later this year are leav­ing the board imme­di­ately. All five of those direc­tors signed off on the hir­ing of Thomp­son, a move that made them all look bad by the recent rev­e­la­tion that they didn’t catch an inac­cu­racy cir­cu­lat­ing for years about his education.

Three of Yahoo’s vacated board seats will be filled by Loeb, and two of his allies, for­mer MTV Net­works exec­u­tive Michael Wolf and turn­around spe­cial­ist Harry Wilson.

Alfred Amoroso, a vet­eran tech­nol­ogy exec­u­tive who joined Yahoo’s board just three months ago, replaces Bostock as chairman.

The reshuf­fled board will now try to com­plete a long-delayed deal to sell part of Yahoo’s roughly 40 per­cent stake in China’s Alibaba Group, an invest­ment that investors view as the company’s most valu­able asset. If a deal can be com­pleted, it could gen­er­ate bil­lions of dol­lars that could be returned to Yahoo share­hold­ers and ease some of the pres­sure on Levinsohn.

Loeb, who con­trols a 5.8 per­cent stake in Yahoo though his Third Point hedge fund, had been wag­ing a cam­paign to gain four seats on the company’s board. Loeb set­tled for a com­pro­mise and Thompson’s depar­ture. The two had a falling out in late March when Thomp­son told Loeb he wasn’t qual­i­fied to be on Yahoo’s board.

Although Yahoo gave no offi­cial expla­na­tion for Thompson’s abrupt exit, it was clearly tied to inac­cu­ra­cies that appeared on his biog­ra­phy on the company’s web­site and in a recent fil­ing with the Secu­ri­ties and Exchange Commission.

The bio listed two degrees — in account­ing and com­puter sci­ence — from Stone­hill Col­lege, a small school near Boston. After dis­cov­er­ing Thomp­son never received a com­puter sci­ence degree, Loeb exposed the fab­ri­ca­tion in a May 3 let­ter to Yahoo’s board. The rev­e­la­tion raised ques­tions about why the accom­plish­ment had peri­od­i­cally appeared on his bio in the years while he was run­ning Pay­Pal, an online pay­ment ser­vice owned by eBay Inc.

Yahoo ini­tially stood behind Thomp­son, brush­ing off the inclu­sion of the bogus degree as an “inad­ver­tent error,” but harsh crit­i­cism from employ­ees, share­hold­ers and cor­po­rate gov­er­nance experts prompted the board to appoint a spe­cial com­mit­tee to inves­ti­gate how the fab­ri­ca­tion occurred.

Thomp­son, 54, spent much of the past week scram­bling to save his job. He sent a memo to employ­ees, apol­o­giz­ing for dis­trac­tions caused by news of the illu­sory degree and then sought to assure other Yahoo exec­u­tives that he wasn’t the source of the inac­cu­racy. He blamed a Chicago head­hunt­ing firm, Hei­drick & Struggles.

In an inter­nal memo last week, Hei­drick & Strug­gles denied Thompson’s accu­sa­tion. “This alle­ga­tion is ver­i­fi­ably not true and we have noti­fied Yahoo! to that effect,” CEO Kevin Kelly wrote to employ­ees. On Sun­day, a spokesman for the firm declined to comment.

In a twist, The Wall Street Jour­nal reported Mon­day that Thomp­son had told the board last week that he has thy­roid can­cer. The diag­no­sis con­tributed to his deci­sion to step down, accord­ing to the newspaper’s uniden­ti­fied sources.

The flap over the mis­lead­ing bio ele­vated the angst in Yahoo just a month after Thomp­son laid off 2,000 employ­ees, or 14 per­cent of the work­force, in the biggest pay­roll purge in the company’s his­tory. In recent weeks, Thomp­son had been draw­ing up plans to close or sell about 50 of Yahoo’s ser­vices while also antag­o­niz­ing much of Sil­i­con Val­ley with a law­suit alleg­ing the rapidly grow­ing social net­work Face­book stole some of its tech­nol­ogy from Yahoo.

“In spite of the very bumpy road we’ve trav­eled, we are achiev­ing gen­uine and mean­ing­ful suc­cesses in the mar­ket­place every day and head­ing in the right direc­tion,” Levin­sohn wrote in his Sun­day memo.

Stifel Nico­laus ana­lyst Jor­dan Rohan thinks Levinsohn’s media back­ground may make him bet­ter qual­i­fied to be Yahoo’s CEO than Thomp­son, whose expe­ri­ence is rooted in elec­tronic commerce.

“Ross Levin­sohn is common-sense exec­u­tive, a prag­matic oper­a­tor who peo­ple love to work for,” Rohan said. “He is the right guy for this job.”

Thompson’s inac­cu­rate resume might have been more for­giv­able at a com­pany that was post­ing big returns for its share­hold­ers, said James Post, a man­age­ment pro­fes­sor at Boston University.

Yahoo’s stock has been sag­ging since it squan­dered an oppor­tu­nity to sell itself to Microsoft Corp. in May 2008 for $33 per share, or $47.5 bil­lion. Yahoo’s stock hasn’t traded above $20 since Sep­tem­ber 2008.

The shares climbed 37 cents in Monday’s late morn­ing train­ing $15.56, leav­ing Yahoo with a mar­ket value of $19 bil­lion. That’s roughly the same as the indi­vid­ual for­tunes of Google co-founders Larry Page and Sergey Brin, whose com­pany was still smaller than Yahoo when it went pub­lic in 2004.

Face­book founder Mark Zuckerbeg’s wealth could sur­pass Yahoo’s mar­ket value depend­ing on the price set in an ini­tial pub­lic offer­ing of stock that is expected to be set Thursday.

Yahoo’s strug­gles cen­ter on the company’s inabil­ity to keep up with Google and Face­book in the race for online adver­tis­ing. Yahoo’s annual rev­enue has fallen from a peak of $7.2 bil­lion in 2008 to $5 bil­lion last year. Over the same period, Google’s annual rev­enue has climbed from $22 bil­lion in 2008 to $38 bil­lion last year. Facebook’s annual rev­enue has increased from $272 mil­lion in 2008 to $3.7 bil­lion last year.

“Yahoo has been embat­tled for such a long time that there are a lot of peo­ple pre­pared to believe the worst about that com­pany,” said Post, who spe­cial­izes in cor­po­rate gov­er­nance and pro­fes­sional ethics. “When you’re angry at the man­age­ment and the board, when nothing’s going right and you’re los­ing money, it’s under­stand­able that share­hold­ers would adopt an ‘off with their head’ attitude.”

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