Yahoo Fires CEO Carol Bartz (UPDATED)

Yahoo's board of directors has "removed" Carol Bartz from her position as CEO, according to an announcement from Yahoo on Tuesday.

The board is seeking her replacement and has appointed Yahoo CFO Tim Morse as interim CEO. The executive reorganization is effective immediately, the company indicated.

Bartz took over as CEO in January 2009, after Yahoo founder Jerry Yang stepped down from the CEO position. Microsoft ended acquisition talks with Yahoo after failing to reach an agreement with Yang. However, Bartz successfully negotiated a search-advertising deal with Microsoft after assuming the CEO role.

Bartz entered Yahoo at a time when the company was cash-short, and the Microsoft deal promised a new infusion. The board seemed to acknowledge that effort in a statement.

"On behalf of the entire Board, I want to thank Carol for her service to Yahoo! during a critical time of transition in the Company's history, and against a very challenging macro-economic backdrop," said Roy Bostock, chairman of Yahoo's board of directors. "I would also like to express the Board's appreciation to Tim and thank him for accepting this important role."

Bartz sent an e-mail to Yahoo employees that was published by several media outlets, including AllThingsD and the New York Times, citing sources within Yahoo:

I am very sad to tell you that I've just been fired over the phone by Yahoo's Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward.

Yahoo said it is beginning a search for a permanent CEO, possibly with the help of a "nationally recognized executive search firm." In the meantime, it has formed an Executive Leadership Council composed of senior Yahoo executives to support Morse in his interim role.

AllThingsD's Kara Swisher described Yahoo's decision not to name a permanent successor immediately as "curious," and speculated whether it portends an acquisition deal. According to "multiple sources," Swisher said that "while there is no serious effort afoot as yet, there have been increasing signs of late that Yahoo's board is ready to listen to any serious offers."

At any rate, some reports suggest that the relationship between Bartz and Yahoo's board of directors had been souring for some time. During an otherwise amicable shareholder meeting in June, the NYT reported Bartz fended off comments from one disgruntled investor who said, "[T]he buyout talks for your contract need to start today." The investor also invoked a rumor -- which an NYT source refuted -- that Yahoo had been looking for a new CEO.

The frustration may stem from, among other things, Yahoo's stagnant-to-sliding search market share and stock price, as well as its perceived lack of innovation. Yahoo's search advertising deal with Microsoft, in which Yahoo uses Microsoft's adCenter platform to conduct ad-space auctions, has not yielded the company significant gains. In an April earnings call, Bartz said, "AdCenter isn't yet producing the RPS [revenue per search] we hoped for and are confident [is] possible. Advertisers are seeing strong ROI, but technical limitations in the current adCenter platform mean the click volumes just isn't there yet. We had expected RPS to be neutral by midyear, it's now evident that it will take Microsoft longer to achieve that goal. We expect that to happen by year-end."

In its Q2 earnings report, Yahoo recorded a 5 percent revenue decline from the year-ago period. It generated $1.08 billion in revenue, falling short of the $1.11 billion investors expected.

UPDATE, 9/8: In an interview with Fortune one day after her firing, Bartz said that she remains on the Yahoo board of directors.


About the Author

Gladys Rama (@GladysRama3) is the editor of, and, and the editorial director of Converge360.


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