Pressure builds on Yahoo CEO

Just before Google Inc. went public nearly three years ago, Yahoo Inc. Chief Executive Terry Semel assured a roomful of securities analysts and money managers that his company would remain the Internet’s brightest star.

Google has so thoroughly eclipsed its rival since then that a growing contingent of Yahoo shareholders believes the company would be better off without Semel, who could face a chorus of discontent when he takes the stage at Yahoo’s annual shareholders meeting Tuesday.

“The company is drifting,” said Eric Jackson, who intends to confront Semel during the meeting on behalf of about 80 Yahoo stockholders who own a combined 2 million shares in the Sunnyvale, Calif.-based company. “And its problems ultimately lie at Terry’s feet.”

In the last year alone, Google has trumped Yahoo in the bidding for online video pioneer YouTube Inc. and Internet display ad service DoubleClick Inc. while widening its lead in the lucrative field of search. Mountain View, Calif.-based Google has established such a commanding advantage that it makes more profit in a single quarter than Yahoo does in a year.

After Google completed its August 2004 initial public offering, Yahoo was still the larger and more valuable company. The IPO gave Google a market value of $23 billion compared with $39 billion for Yahoo at the time.

Google’s stock price has increased more than sixfold since then, however, creating about $140 billion in additional shareholder wealth. Meanwhile, Yahoo’s stock price has fallen about 4% in the same period, leaving the company with a market value of $37 billion.