Yahoo chief executive Marissa Mayer dismissed chief operating officer Henrique de Castro after 14 months, amid disappointment with his efforts to boost growth, according to people with knowledge of the matter.
In a memo to employees, Ms Mayer said she made the decision that Mr de Castro should leave, according to a person who saw the note and asked not to be identified because it wasn’t made public.
There had been friction between the two executives for at least six months, another person said.
Ms Mayer, who took the helm in July 2012, has been working to reinvent Yahoo by revamping products and adding exclusive content to help it compete with Google and Facebook for users and advertisers.
New products, redesigned email and a spending spree on startups, engineers and media figures so far haven’t translated to growth.
Analysts project that revenue dropped 1 percent in 2013, with a 3 per cent gain estimated for this year and next, according to data compiled by Bloomberg.
“It’s a negative for Yahoo,” said Scott Kessler, an analyst at SandP Capital IQ who recommends holding the stock.
“This is someone who had a tremendous amount of responsibility. Now, there’s a hole in the executive team.”
Mr De Castro's departure, the first high-profile exit of an executive Ms Mayer recruited, is effective today, the company said yesterday in a filing with the US Securities and Exchange Commission.
Yahoo didn't name a replacement. Sarah Meron, a spokeswoman for Yahoo, declined to comment.
Mr De Castro (48) didn’t respond to requests for comment.
Wooing advertisers
Mr De Castro, Ms Mayer’s top lieutenant, joined Yahoo in November 2012 from Google. He will receive severance benefits and equity awards in line with his contract, Yahoo said yesterday.
His made an estimated $109 million from his stint at Yahoo, including salary, bonus, stock awards, compensation for leaving Google and severance payments, according to Equilar, a compensation researcher based in Redwood City, California.
Mr De Castro’s exit comes after Sunnyvale, California-based Yahoo unveiled new advertising options earlier this month, including a service to help marketers more accurately target audiences and a new ad exchange, which gives companies more tools to manage promotions on their websites.
Ms Mayer has also overhauled the company's email platform and acquired more than two dozen companies, including Tumblr for more than $1 billion last year, and has hired journalists such as Katie Couric to bolster news and media content.
Google competition
Yahoo’s share of the US digital-advertising market is estimated to shrink to 5 per cent in 2015 from 5.8 per cent last year, while Google and Facebook both may expand their shares next year, to 42 per cent and 9 per cent respectively, according to EMarketer.
"It has seemed that de Castro was hired at a time when the company's senior management was not particularly focused on advertising, and with time it seems that there is both a focus and increasing concern about the absence of a turnaround," Brian Wieser, an analyst at Pivotal Research Group, said in an email. He rates Yahoo shares a hold.
Yahoo shares slipped as low as $40.75 in extended trading after the announcement of Mr de Castro’s exit. They fell less than 1 percent to $41.07 at yesterday’s close in New York. The company’s stock doubled last year.
Alibaba stake
While the stock has surged, some investors have attributed the gains to optimism regarding Yahoo’s stake in Chinese e-commerce company Alibaba Group Holding Ltd., rather than faith in Ms Mayer’s turnaround.
Alibaba, which plans to sell shares to the public, more than doubled profit in the second quarter to $707 million.
While Yahoo has continued to be profitable under Ms Mayer, who also joined from Google, it has struggled to deliver sales growth.
Third-quarter sales, minus revenue passed on to partner sites, slid about 1 per cent to $1.08 billion from a year earlier. Fourth-quarter revenue is forecast to fall 1 per cent.
Before joining Mayer at Yahoo, Mr de Castro was vice president of Google’s partner business solutions worldwide.
Since arriving at Yahoo in November 2012, Mr de Castro’s salary, bonuses and equity grants totaled $44.8 million before taxes, according to Equilar.
That included restricted stock units to compensate him for leaving Google, where he worked since 2006. Upon his termination, Mr de Castro will also receive $64.6 million, including accelerated equity grants, in accordance with his contract, Equilar said.
Bloomberg
