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Yahoo's Semel Replaced by Co-Founder Yang

UPDATED: Yahoo CEO and board chairman Terry Semel today passed the torch to company co-founder Jerry Yang after months of missteps and grumblings from former employees and investors about the way the company was being handled.

Semel will assume the position of non-executive board chairman and serve as an adviser to the company's senior management team. Susan Decker, formerly executive vice president and head of Yahoo's Advertiser and Publisher Group, will become president of Yahoo.

"The past year has been a difficult one for Yahoo and none of us have been satisfied. This is the right thing to do for Yahoo and the right time to do it," Semel said on a conference call this afternoon to announce the news.

Semel joined Yahoo in 2001, helping the company refocus on key strategic priorities and execute clear plans for growth, while building and acquiring products and properties. In his time at Yahoo, revenues grew nearly nine-fold to $6.4 billion for 2006, and the portal's audience jumped from 170 million users to more than 500 million this year.

But the short term has been more difficult for Yahoo and Semel. Despite all of that growth, the company weathered criticism after its new Panama platform was slow to get out the door, with analysts arguing the delay left the company steps behind Google , Microsoft and AOL in the online advertising arms race.

Following that, senior vice president Brad Garlinghouse wrote a note, dubbed the "Peanut Butter Manifesto," which argued that Yahoo spreads itself too thin.

The hits kept coming for Yahoo in 2007, as even good news turned bad in Semel's last year on the job.

Take the buzz surrounding the Yahoo advertising platform, code-named Panama. Three weeks after its Feb. 5 launch, word came from metrics firm comScore that click-through rates for Yahoo-sponsored search ads were up and so were sponsored clicks as a percentage of total user clicks on Yahoo.

Yahoo designed Panama in hopes of creating just such an impact. Specifically, Panama's innovations were supposed to help Yahoo make sure it was pairing the highest "quality" advertisements with users' search queries, instead of simply displaying ads with the highest bids.

In late February, it seemed like that was happening. The good news about Panama got around, and on Monday, the company's stock price had reached a near 52-week high of $32.09. But then the market closed and Yahoo reported its 2007 first-quarter earnings.

Then came the bad news.

Quarterly profits were down 11 percent to $142.4 million and once-optimistic investors bailed on Yahoo. Company shares dropped 11 percent to $28.31.

Wall street reacted more bullishly to today's news as Yahoo's stock rallied 81 cents to close at $28.12 Monday. New CEO Jerry Yang shared their optimism on today's call, but that's not to say he won't miss Semel.

"It's been a real honor to work with Terry these last six years," Yang said. "It's an emotional time for us at Yahoo."