Wednesday March 7 7:00 PM ET Yahoo! CEO Tim Koogle To Step Down
By BRIAN BERGSTEIN, AP Business Writer
SAN JOSE, Calif. (AP) – Tim Koogle is stepping aside as chief executive of struggling Internet bellwether Yahoo! Inc., though he will stay on as chairman.
The company also announced Wednesday that its first-quarter operating earnings will come in at “approximately break-even,” well short of Wall Street’s expectations. Full-year results also could miss targets.
Koogle, who will remain CEO until a replacement is found, said he felt Yahoo needed an infusion of new talent.
“I’m looking over the horizon, and saying, when the economy starts to firm and Yahoo has weathered through this, what do we need to have in place so that we’ve got enough bench strength to scale continuously as we grow for the next five to 10 years?” Koogle said in a conference call with financial analysts. “I think it’s a great time to be proactive about that, and bring in and extend our team.”
The news followed a day of intense speculation after trading in shares of Yahoo were halted shortly after the markets opened Wednesday. The company had canceled an appearance at an Internet conference in New York.
Shares dropped fell $1.38 to $21 before trading was halted on the Nasdaq Stock Market. After the news was released, shares fell another $2.31, or 11 percent, to $18.69.
Koogle – known as “TK” around the company – joined Yahoo after serving as president of Seattle-based Intermec Corp. and spending nine years as an executive at Motorola Inc. He became Yahoo chairman in 1999.
“This guy has a lot of background here, been there from very early on, and has done a real good job,” said John Corcoran, an analyst with CIBC World Markets Corp. Finding a replacement will be difficult, like “getting someone to step in front of an avalanche,” Corcoran said, considering the downward momentum of the company’s stock and the Internet economy.
After starting as a search engine in the mid-1990s, Yahoo grew into a full-service information and shopping portal and at one point became the world’s most popular destination on the Internet. Yahoo also was one of the Internet’s biggest financial success stories for a while, with revenue nearly doubling last year, to $1.1 billion, and profits of $291 million.
But the company’s dependence on advertising – which accounted for nearly 90 percent of last year’s revenue – has proven to be problematic in the dot-com meltdown and the overall slowing of the economy.
“It’s been a real tough quarter for Internet advertising,” said Abhishek Gami of William Blair & Co.
Yahoo had more than 55 million unique visitors in January, behind America Online Inc.’s and Microsoft Corp.’s sites, according to Jupiter Media Metrix. It was the first time since July 2000 that Yahoo trailed Microsoft.
By comparison, AOL had more than 64 million unique visitors and Microsoft had 56.2 million. The number is a count of total distinct users who visited a Web site or online property at least once in a given month.
Yahoo said it expects to break even in the first quarter, which ends March 31, excluding one-time charges. Analysts surveyed by First Call/Thomson Financial had been expecting earnings of 5 cents per share, down from 10 cents per share a year ago.
For all of 2001, analysts were expecting earnings of 36 cents a share. Yahoo stopped short of issuing formal guidance for the year because business conditions for the final six months are unclear, but chief financial officer Susan Decker said Yahoo was “committed to achieving break-even levels of profitability.”
Yahoo, which will formally announce earnings on April 11, also said it expects first quarter revenues of between $170 million and $180 million; a year ago, Yahoo posted revenue of $228.4 million. Even worse, deferred revenue from 2000 will account for a whopping $117 million of this quarter’s sales figure.
Yahoo said it was being hurt as the weakening economy forced advertisers to cut back on their marketing. The company also is encountering difficulties as its advertising base shifts from Internet businesses to more traditional companies.
“All businesses in the United States are facing challenging economic conditions that have weakened further in recent weeks, and as consumer confidence and spending has deteriorated, a broad range of customers have delayed their spending across all media formats until their economic outlook improves,” Koogle said.
Yahoo also has been suffering turnover in a number of its top divisions – in recent weeks, the company’s heads of operation for Asia and Europe have resigned.
For months, rumors have circulated that Yahoo would merge with another company, most likely an entertainment titan such as Walt Disney Co. or Viacom Inc. that could help it compete with the AOL-Time Warner Inc. behemoth.
Koogle, however, has been saying a deal like that actually could reduce the site’s highly valued breadth of content. And last week, Yahoo adopted a shareholder rights plan, known as a poison pill, that would likely deter any attempt at a hostile takeover. The company said the plan was not “in response to any effort to acquire control of Yahoo,” however.
Yahoo also announced a stock repurchase program Wednesday of up to $500 million of its outstanding shares over the next two years. Shares of Yahoo are trading more than 90 percent off their 52-week high of $205.63, set last March.