• by Tameka Kee , Laurie Petersen , June 19, 2007

With a steady stream of departures at all levels turning into a flood, Yahoo's co-founder and newest CEO Jerry Yang said "motivating, developing and attracting talent" will be one of his top priorities. In a Silicon Valley awash in venture-funded startups, that may be the toughest challenge.

Despite protestations from the board, speculation is rampant that the company is set to be broken up or merged.

Yang sought to galvanize investors during the press conference announcing his appointment with six words: "I am ready for the challenge."

Yang defined the key challenges that the Web giant continues to grapple with: from an underperforming search monetization platform, to the ever-increasing spate of rivals for its share of user traffic, to the "competition for our talent" that has led to employee attrition. He also laid out a road map for how the company would move forward.

Yang will have a formidable partner to lead Yahoo through its multi-year expansion plan, as former executive vice president Sue Decker now assumes the role of president. In her new role, Decker will continue to build the partnerships that are integral to Yahoo's growth strategy (such as a display advertising deal with Comcast), and will further implement the company's operational reorganization that began last year under Terry Semel, who announced his resignation after the market closed.

Yesterday's announcement ended months of speculation on whether Semel would keep his position as CEO amidst Yahoo's struggles with sub-par earnings forecasts, the loss of senior management personnel, and the relentless industry perception that it's always a step behind Google.

Semel countered those theories indirectly in his public resignation letter and statement, saying: "I've been clear in my desire to take a step back from an executive role, sooner rather than later. I've long been talking to the Board about ensuring a smooth succession--and the need for a leadership team committed to leading Yahoo through its multi-year transformation."

The management change highlighted a possible reason why Yang delicately evaded questions during last week's shareholder meeting about whether he would assume the role of CTO. But it raised new queries among investors and market analysts, who sought to quantify how technology investment would factor into the company's forward-thinking plans, as well as how Yang would handle the ongoing search for a new CTO.

The blogosphere yesterday raised questions about why Yang was chosen in lieu of Decker (who was widely believed to be in line for the CEO role)--but the most interesting feedback may have been from Yahoo employees themselves.

For example, minutes after the press conference, sites such as Valleywag had employees wondering "why we read about this change in the media before the management had even bothered to send an email out to the employees and shareholders ..."

With acquiring and retaining key talent now one of Yang's primary focal points, perhaps fewer "Yahoos" will have to publicly ponder their company's strategies in the future.

Both Yang and Decker promised more detailed operations insights, as well as positive expectations for July's 2Q 07 earnings call, including possible double-digit revenue per search gains.

Semel, 64, will remain chairman in a non-executive role after spending the past six years running the company.

Monday's shake-up unfolded less than a week after Semel faced off with shareholders disillusioned with his S&P-leading pay package coupled with a nearly 30% drop in Yahoo's stock price during the past 18 months as the company's financial growth fell further behind Google's torrid pace.

Semel is credited with successfully overhauling Yahoo's sales force, bringing in ad industry veteran Wenda Harris Millard as Chief Sales Officer and boosting its advertising business by acquiring businesses such as Overture Services, which took Yahoo into the lucrative market for internet search ads.

Yet the phenomenal growth of Google, which now has more than twice the sales of Yahoo, and the entrance of so-called social networking sites such as Facebook and MySpace, has taken a toll on Yahoo's sales growth, and with it Semel's reputation.

Said one West Coast wag: "All [Semel] did was show up for the bandwidth boom and then ride it all the way to the bank. Damn, I love Hollywood!"

Indicative of the mixed emotions among present and past Yahoos, one longtime former employee wrote back "sadness" when asked how the news was going down.

The stock market voted with thumbs up, sending Yahoo's shares up more than 4% in after-hours trading.