Yahoo Inc. chairman Roy Bostock fired CEO Carol Bartz over the phone on Tuesday, ending a tumultuous tenure marked by stagnation and a rift with Chinese partner Alibaba.
Chief financial officer Tim Morse will step in as interim CEO, and the company will search for a permanent leader to spearhead a battle in online advertising and content with rivals Google Inc. and Facebook.
Shares in the company jumped 6 per cent. They are scarcely higher than where they were when Ms. Bartz first took the reins in January 2009 with hopes of reviving stalled growth and competing with up-and-coming rivals.
On Tuesday, her efforts were abruptly halted after Mr. Bostock called with the bad news.
"I am very sad to tell you that I've just been fired over the phone by Yahoo's Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward," the outspoken CEO said in a two-sentence e-mail to employees obtained by Reuters.
The turn of events surprised few Wall Street observers who had tracked a rising torrent of criticism and watched revenue growth falter and sputter out.
Some analysts said Ms. Bartz's departure signaled the company had run out of options after failing to dominate the advertising and content markets and handing over its search operations to Microsoft Corp.
That partnership, under which Microsoft handles search for Yahoo's websites and keeps a portion of ad revenue, appears to favour the software giant at Yahoo's expense.
Yahoo said that a newly-formed executive leadership council would help Mr. Morse in managing day-to-day operations as well as supporting "a comprehensive strategic review" to position the company for future growth.
"It's hard to say what direction they are going to head. What is the next step for Yahoo? They went down the road of search, they went down the road of media, becoming a content company, they went down the road of advertising," said YCMNet Advisors CEO Michael Yoshikami.
"I'm not sure where they go right now. One wonders if this means that they might be ripe for a takeover."
Mr. Bostock voiced his public support in June for the CEO, a lightning rod for criticism from Wall Street, and known for her tough attitude and salty language.
Ms. Bartz's ouster capped a decade-long fall from grace for a company whose shares traded at more than $125 in January 2000 during the dotcom bubble – but now languishes at about a 10th of that level.
Yahoo is still one of the most popular destinations on the Internet but faces increasing competition from social networking service Facebook and from Google.
Ms. Bartz arrived at Yahoo in January 2009 after a solid showing at software giant Autodesk with high hopes of turning around Yahoo, after co-founder Jerry Yang was widely thought to have botched a $47.5-billion proposed takeover by Microsoft, rebuffing that advance as too low. Yahoo is worth about $16-billion today, with much of that ascribed to its slice of Alibaba.
The Internet company reported a slight decline in net revenue in the second quarter, as efforts to restructure its sales force caused disruptions.
Research firm eMarketer has projected that Facebook would overtake Yahoo this year to collect the biggest slice of online display advertising dollars in the United States.
The management and board also came under fire after the company's handling of its relationship with China's Alibaba Group, in which Yahoo owns a stake of roughly 40 per cent.
The rocky relationship between the companies came to a head in May when it was revealed that Alibaba had abruptly handed Alipay – one of Alibaba's crown jewels – to a company controlled by Alibaba founder Jack Ma, apparently without Yahoo's knowledge.
"They are going to need a vision of what they want to be in the future. And I don't think investors really understood what that clear vision was," Mr. Yoshikami said.
The news of Ms. Bartz's ouster was first reported by tech blog AllThingsD.
Shares in Yahoo jumped more than 6 per cent in after-hours trading to $13.72, from a close of $12.91 on the Nasdaq.