Yahoo names Levinsohn interim CEO
NEW YORK (AP) -- Yahoo swept out Scott Thompson as CEO Sunday in an effort to clean up a mess created by an exaggeration about his education that destroyed his credibility as he set out to turnaround the long-troubled Internet company.
Ross Levinsohn, who oversees Yahoo's content and advertising services, is taking over as interim CEO. He becomes the fourth person to run Yahoo in eight months.
Yahoo hired Thompson, the former head of eBay's PayPal, in January to orchestrate a reversal. Though, Yahoo is one of the Internet's most-visited websites, the company has struggled to grow in face of competition from the likes of Google and Facebook. The company's difficulties have irked investors. Thompson took the helm as Yahoo's fourth chief executive in less than five years.
Thompson's abrupt exit after just four months on the job came as part of the latest shake-up on Yahoo's 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. Three of the spots will be filled by activist hedge fund manager Daniel Loeb, a disgruntled shareholder who dropped a bombshell that led to Thompson's departure, 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 appointment of the new directors ends a potentially disruptive battle with Loeb, who was waging a campaign to gain four seats on the company's board. Loeb wound up settling with three board seats and the satisfaction of ushering out Thompson, who antagonized Loeb in late March by telling him he wasn't qualified for the board.
In a statement issued through Yahoo, Loeb said he is "delighted" to join the Yahoo board and promised to "work collaboratively with our fellow directors."
Yahoo Inc. gave no official explanation for Thompson's departure, but it was clearly tied to inaccuracies that appeared on Thompson's 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. Loeb discovered Thompson never received a computer science degree from the college and 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 out a memo to employees to apologize for the 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.
Thompson's rapid downfall leaves Yahoo in turmoil amid a reorganization that had only just begun. Last month, Thompson laid off 2,000 employees, or 14 percent of the workforce, in the biggest payroll purge in the company's history, and had started to identify about 50 services that he wanted to close or sell.
Now it falls to Levinsohn, who Thompson had promoted to a more prominent role last week, to get Yahoo back on track. He joined Yahoo 18 months ago when the company was still being run by Carol Bartz, who was fired in September because she hadn't developed an effective turnaround plan.
Carlos Kirjner, a senior analyst at Sanford C. Bernstein suggested that Thompson's previous job, as president of eBay's PayPal, hadn't prepared him for Yahoo.
"It is very different to be CEO of a growth company, making choices between opportunities, and to be CEO of a company in turnaround mode, whose parts are declining or losing share," Kirjner said.
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. But it's likely that Third Point was looking for an excuse to get rid of Thompson, Post said.
"They've had expensive and talented investigators turning over every rock and pebble to find something they could use for leverage," said Post, who specializes in corporate governance and professional ethics.
The resume fiasco has had a relatively limited effect on the stock price. Shares fell 1.6 percent to $15.15 on May 4, the day after Third Point unleashed the news about Thompson's resume. They closed at $15.19 on Friday. They're up from their $14.44 close on Sept. 8 when Loeb sent his first missive to Yahoo's board urging changes at the company.
But long-term, shares have fallen. They're down about 12 percent compared to a year ago. They're down 46 percent from Feb. 1, 2008, when they soared almost 50 percent after Microsoft offered to buy the company for $31 a share. Yahoo's board rejected the deal, saying it wasn't enough. Four of the five directors who are leaving were on the board at that time. Yahoo's stock hasn't traded above $20 since September 2008.
"Yahoo has been embattled for such a long time that there are a lot of people prepared to believe the worst about that company," Post said. "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."
Brian Wieser, a senior analyst at Pivotal Research, said he believes Thompson's ouster will be a positive move, removing an overhanging distraction and adding board members with new perspectives. Wieser said employees he'd talked to believed Thompson was showing a lack of appreciation for some of Yahoo's business units, and that morale had degenerated even more during his tenure. "It was bad," Wieser said, "and went to worse."
Wieser said that Third Point is "exactly the kind of investor every company should want," since the hedge fund is apparently trying to heal Yahoo, not break it up. "There are no barbarians at the gate here," Wieser said. "They're actually trying to help."