Yahoo CEO Marissa Mayer is cutting loose her top lieutenant
in a possible sign that the Internet company’s efforts to revive its
long-slumping advertising sales aren’t paying off.
Wednesday’s surprise announcement of the departure of Yahoo’s
chief operating officer, Henrique de Castro, represents a setback for Ms.
Mayer, who signed him to a $58 million deal just 15 months ago to help her lure
more advertisers to a company that has been struggling to compete against
Google Inc. and Facebook Inc. in the race for online marketing dollars.
Yahoo Inc. declined to comment on the reasons for Mr. de
Castro’s abrupt exit. Ms. Mayer didn’t name his replacement.
It is doubtful Mr. de Castro would be leaving if he were
bringing in the revenue that Ms. Mayer envisioned, said BGC Financial analyst
Colin Gillis.
“This was one of her key hires and he is already gone,” Mr.
Gillis said. “It doesn’t look good.”
Ms. Mayer, who knew Mr. de Castro from the days when both
executives worked at Google, will likely be questioned about what went wrong
when she reviews Yahoo’s financial results for the fourth quarter, scheduled to
come out Jan. 28. The Sunnyvale, California, company hasn’t warned that it
missed its revenue forecast for the three-month period ending in December, an
indication that Yahoo must have at least been reasonably close to hitting that
financial target set by Ms. Mayer. Yahoo had projected fourth-quarter revenue
of about $1.2 billion after paying commissions to its ad partners, unchanged
from the previous year.
Mr. de Castro (48) will leave Yahoo with much of the money
and stock that he got when Ms. Mayer lured him to California from a Google
advertising job in Europe. His severance package includes $20 million of
restricted stock that wasn’t scheduled to fully vest until late 2016. He also
will receive $1.2 million to cover the next two years of his salary. His rights
to another batch of restricted stock valued at $9 million also have vested.
Although Mr. de Castro’s hiring turned out to be an expensive
mistake, Ms. Mayer is unlikely to face a harsh backlash from Yahoo stockholders
who have made a lot of money since she defected from Google in July 2012.
Yahoo’s stock has nearly tripled in value since Ms. Mayer’s
arrival, even though the company’s revenue hasn’t increased under her
leadership. The company’s shares dipped 7 cents to close at $41.07, then
slipped another 29 cents in Wednesday’s extended trading.
Ms. Mayer has been benefiting from a $1 billion investment in
Chinese Internet company Alibaba Holding Group that was engineered in 2005 by
Terry Semel and Jerry Yang, two former Yahoo CEOs who stepped down as the
company’s stock plunged.
Yahoo reaped a $7.6 billion windfall by selling a portion of
its Alibaba holdings shortly after Mayer took over and still retains a 24
percent stake in the Chinese company. Many investors have been buying Yahoo
stock as a way to get a piece of privately held Alibaba, whose revenue and
earnings are growing rapidly as it prepares to go public.
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