In early May, a little more than a month before she became president of Yahoo, Susan L. Decker found herself dining at Gorat’s Steak House in Omaha along with her husband and two of the restaurant’s most famous regulars: Warren E. Buffett and Bill Gates. She was in town to join the board of Buffett’s holding company, Berkshire Hathaway, and had come to the legendary investor’s attention through recommendations from Charles Munger, his longtime associate; Donald E. Graham, the chairman of the Washington Post Co.; and David S. Gottesman, a fellow Berkshire board member.
“She passed some pretty tough tests when she got A-pluses from all three,” Buffett recalls. He describes Decker as a “home run” for a Berkshire board seat because of her independence, interest in the company, dedication to shareholders and business
savvy. “Sue is 100% on all four of those,” Buffett says.
Going places: Decker will be running most of the company’s day-to-day business [MALAY KARMAKAR/MINT]
In her ascent from financial analyst to head of research at a major Wall Street brokerage firm to chief financial officer and now president of Yahoo, Decker’s acumen has drawn praise from other well-known business leaders—including Steven P. Jobs and Craig R. Barrett, who named her to the boards of Pixar Animation Studios and Intel, respectively, and Hamilton E. James, president of the Blackstone Group. Now, Decker’s abilities will be tested as never before. Along with Yahoo co-founder Jerry Yang, 38, who stepped in as chief executive last month in a management shake-up, Decker, 44, faces the daunting challenge of pulling Yahoo from under the shadow of Google, rebuilding morale inside the company, attracting top-notch recruits and, maybe hardest of all, delivering far better results for Yahoo’s long-suffering investors. The company’s shares are trading at around $27 (about Rs1,100), down 37% from a high of more than $43 in January 2006.
By many measures, Yahoo remains one of the most successful companies on the Internet. It attracts nearly 500 million visitors around the world every month to its websites, where it offers a plethora of content and services. And it is one of the largest sellers of Internet advertising, which it places both on its Web portal and on other high-traffic online destinations such as eBay, Comcast.com and hundreds of newspaper websites. Last year, it earned $751 million in profits, on sales of $6.4 billion.
Yet, over the last 18 months, Yahoo has suffered its biggest slump since the collapse of the dot-com bubble. The company has been eclipsed by the phenomenal rise of Google, which handily beat Yahoo in the most lucrative business on the Internet: search and search advertising. As a result, Google now makes far more money in one quarter than Yahoo does in a year, and Google’s market value of $162.8 billion is more than four times that of Yahoo, which stands at $36.5 billion. As Yahoo races to close that gap, its bread-and-butter business—the sale of banners and other graphical ads—is showing signs of weakness amid growing competition from MySpace, Facebook and countless other sites.
Analysts, meanwhile, say that Yahoo, a company with 12,000 employees, has grown bureaucratic and slow, causing it to miss out on some of the hottest Internet trends, such as social networking. They say it has also missed out on some of the smartest potential acquisitions, including YouTube, which was bought by Google, and Facebook, which Yahoo once considered buying. Now Facebook says it is not for sale, and even if it were, the price would likely be far higher than the $900 million or so that Yahoo offered last summer. During the last several months, Terry S. Semel, who ran Yahoo until two weeks ago, started a number of initiatives to revive the company. When those steps proved not enough to stop an exodus of senior executives or to placate increasingly restless shareholders, Semel stepped aside.
Past tense: A file photo of former Yahoo Inc. CEO Terry Semel, who stepped down after his efforts to revive the company proved futile.
Now, some analysts question whether Yang and Decker, both of whom are generally well-liked and respected inside Yahoo, are the right team to lead the company. Neither has extensive operational experience, and both are intimately linked to the strategy that has landed Yahoo in its current malaise. Yet, both have said recently that Yahoo does not need a new strategy but, rather, must do a better job of executing its existing plan. Many people on Wall Street and in Silicon Valley, as well as some inside the company, doubt that better execution alone will be enough.
While Yang is expected to provide the technological vision and be Yahoo’s face to Wall Street and other audiences, it is Decker who will be charged with running most of the company’s day-to-day business. It is largely a new challenge for an executive who spent most of her career tending to financial matters. She was Yahoo’s chief financial officer since 2000, and began running an operating unit, the advertiser and publisher group, only in December.
Decker declined to be interviewed for this article. But several people who know her and have worked with her say that whatever she lacks in operating experience, she makes up for in intelligence and analytical skills.
“She combines the attributes of being a nice person and being able to make a tough decision,” said James of the Blackstone Group, who ran the banking group of
Donaldson Lufkin & Jenrette while Decker ran its research arm.
Yang is expected to provide the technological vision and to be Yahoo’s face to Wall Street and other audiences
As leader of a group of independent-minded research analysts, Decker demonstrated skills that will be handy in running Yahoo, James said: “She’s one of the few people around who can successfully manage a group of people who are creative, highly paid, have big egos and have an artists’-colony temperament.”
Decker, who grew up in Denver, earned a degree in economics and computer science at Tufts University. She later worked as a computer programmer at a General Electric subsidiary before going to Harvard Business School. In her 14 years at Donaldson Lufkin & Jenrette, Decker quickly developed a reputation as a star analyst and independent thinker.“She can’t be easily persuaded about things by other people without doing the analysis herself,” said Dennis H. Leibowitz, managing general partner at Act II Partners (a hedge fund), who worked with Decker at D.L.J. Shortly after Decker joined Yahoo in mid-2000, the bottom fell out of the online advertising market as an untold number of dot-coms shut their doors. During that period, as Yahoo’s shares lost 90% of their value, Decker was credited with helping to reset expectations both inside and outside the company, cementing her reputation as a straight shooter and a savvy financial operator.
“She was extremely well thought of as a CFO,” said Christa Quarles, an analyst at Thomas Weisel Partners. “But it’s one thing to manage the results and another thing to manage an organization.”
Some company insiders say, however, that from the beginning of her tenure, Decker was far more closely involved with Yahoo’s business than most traditional finance chiefs, formulating strategy and working closely with managers to help them understand how the performance of their own business units affected Yahoo’s financial results. Colleagues describe Decker as intense and hard-driving. But her colleagues and friends also describe her as unpretentious and fun-loving. Despite her intense job, and a commute of more than one hour from her home to Silicon Valley, Decker finds time to stay physically active. She has run marathons and likes to ski and hike. She rode a motorcycle through New Zealand with her husband and once arrived at a Yahoo employee meeting riding a Harley-Davidson.
Over the past year or so, Decker has played a leading role in helping to transform Yahoo from a seller of ads on its own site into a seller and broker of ads across the Web. She led negotiations of a multi-year advertising deal with eBay and of a separate advertising and content distribution alliance with a consortium of companies representing some 260 newspapers.
“The newspaper deal could be meaningful,” said Quarles at Thomas Weisel. But she said the full financial impact of this and other alliances might not be felt until next year.
Decker also was deeply involved with a deal to acquire Right Media, a marketplace where online advertisers bid for ad space on sites across the Web in real time. The deal has yet to close.
In all those negotiations, Decker showed herself willing to delve into the minutiae of online advertising and other aspects of Yahoo’s business.
“The deal wouldn’t have gotten done without her,” said John Donahoe, president of eBay Marketplaces, of the eBay deal. Donahoe, who was her counterpart during more than two months of negotiations that led to the agreement in April 2006, said that Decker worked to understand details like which types of ads would be acceptable to eBay sellers and which would not, and challenged Yahoo’s own product teams to modify their technology to deliver those ads.
“There were several instances when we hit roadblocks, and she was very creative in thinking of ways to get around them,” Donahoe said.
Similarly, Yahoo insiders credit Decker with turning an agreement with newspaper companies from a simple deal to sell employment classifieds through Yahoo’s HotJobs into a wide-ranging partnership. Under the terms of the deal, which was announced in November and later expanded, Yahoo and newspapers will share news stories, while newspapers will help sell ads on Yahoo, and Yahoo sales people, in turn, will sell ads on newspaper sites.
Decker also played an active role in many other recent initiatives, including the fine-tuning of a new search advertising system known internally as Project Panama. “I don’t think that a Saturday went by without multiple hours of detailed dialogue with Sue to help her understand what we were doing with Panama,” said Mark Morrissey, senior vice-president for global product management. But analysts say Decker is also intimately tied to many of Yahoo’s recent shortcomings. They include not only the delays in Panama, but also a series of mistakes in communicating with Wall Street about those delays—This has hurt Yahoo’s shares. And they include the failure not only to acquire Facebook but also to secure lucrative deals to sell advertising on Facebook and MySpace, which Microsoft and Google won, respectively.
Even the recently announced acquisition of Right Media, which Yahoo considers a success, could have gone better. Yahoo paid less than $45 million for a 20% stake in Right Media last October. By the time Yahoo decided to buy the rest of the company in April, Right Media’s value had soared, forcing Yahoo to pay an additional $680 million for the remaining 80%. “That, again, is an indication of a lack of decisiveness,” Scott Kessler, an analyst at Standard & Poor’s said. “At the end of the day, Sue had some role to play in a lot of those decisions and a lot of the mistakes made.”
Quarles of Thomas Weisel fears that Yahoo’s recent troubles in display advertising may be a sign that history is about to repeat itself. As Yahoo stood still in search advertising, Google innovated at a furious pace to become the runaway leader in that business, she said. Then, when Yahoo finally turned its attention to search, with Project Panama, it stopped innovating in display advertising, just as Google began aiming at that market.
With its planned acquisition of DoubleClick, an online ad firm, Google could encroach further into the one big business where Yahoo still leads.
“It’s going to be challenging,” Quarles said.
Still, even some rivals express confidence in Decker’s abilities. Sheryl Sandberg, a senior executive at Google whose husband, David Goldberg, ran Yahoo Music until earlier this year, has become a good friend of Decker. The two have bonded over conversations on everything from business to work-life balance. “It is nice for me to have a friend who is a very full-time working mother, like I am,” Sandberg said. ( Decker has three children.)
Sandberg said Decker brings a level-headedness to her job that comes in part from having observed and studied businesses go through good and bad times. “Because of her background as an analyst, she has a broad perspective on what industries go through and what companies go through,” she said.
If Decker manages to pull Yahoo from its current slump, she may be up for an even bigger job. She had long been rumoured to be the heir apparent to Semel, and Yang’s appointment as chief executive surprised some people.
But she’ll likely have to deliver results quickly, or Yahoo shareholders could become restless again, and turn Decker into the latest top executive to be shown the door.
Even so, she’ll still probably have some fans in high places. “We made the right choice,” Buffett says of Decker. “She’s young, so she’s going to be there a long time,” he says, referring to the Berkshire board. “When we next have to find a director, I’d be very happy if we find someone like Sue.”