Yahoo reviews hard year

Semel keeps smile at shareholder meet

Coming off Yahoo’s toughest year since the dot-com bust, chairman Terry Semel remained upbeat Tuesday, as he faced shareholders who have watched their investments shrivel while rival Google sprinted further ahead in the online advertising race.

“Yahoo has staked out a strong competitive position,” Semel said during Yahoo’s annual meeting, and “we are better positioned than we have ever been before.”

The gathering gave shareholders a chance to air their frustration over an 18% drop in the company’s stock price since last year’s meeting. The downturn has wiped out about $10 billion in shareholder wealth.

Google shares have surged by 32% during the same period, giving it a market value of nearly $160 billion — more than four times that of Yahoo, which was the larger of the two Internet icons when Google went public in August 2004.

Yahoo shares fell 30¢ to $27.05 Tuesday while Google shares dropped $6.57 to finish at $504.77.

Only one shareholder, Naples, Fla., money manager Eric Jackson, chastised Semel for Yahoo’s inability to keep pace with Google during Tuesday’s two-hour meeting.

“I am surprised you did not apologize to Yahoo shareholders for the last three years of performance,” Jackson told Semel after the executive’s prepared remarks.

Although few of the roughly 150 shareholders at Tuesday’s meeting stepped up to the microphone to question Semel, some used their ballots to express their discontent with the company’s board of directors.

Based on a preliminary count, one-third of the voting shareholders opposed the re-election of at least one Yahoo director. It’s rare for corporate directors to be opposed by more than 10% of the vote in uncontested elections like Yahoo’s.

Company officials declined to provide a specific breakdowns on how shareholders voted for each of Yahoo’s 10 directors, including Semel. The individual results will be disclosed when Yahoo files its second-quarter report with the Securities and Exchange Commission, company spokeswoman Helena Maus said.

Three major shareholder advisory firms had recommended opposing the re-election of Roy Bostock, Ron Burkle and Arthur Kern, the directors on Yahoo’s compensation committee.

The firms concluded the trio should be punished for richly rewarding Semel even as shareholders suffered. In 2006, Semel received a compensation package valued at $71.7 million — more than any other chief executive at the 386 publicly held companies covered in an Associated Press analysis of nation’s top corporate paychecks.

Yahoo co-founder Jerry Yang, who also is a company director, provided Semel with a vote of confidence toward the end of the meeting, when he reassured Jackson that the company is headed in the right direction despite Wall Street’s doubts.

“These are pretty exciting times for Yahoo,” Yang said. “I think the internal perception of what we can achieve as a team is different from the external perception. We want to prove it.”

After Semel’s six years as Yahoo’s CEO, his fate appears to be riding on recent improvements to the company’s system for delivering text-based ads, alongside search results and the Web content of its partners through an upgrade known as Panama.

For the past few years, Google has done a better job picking out ads that induce revenue-generating clicks — one of the biggest reasons why it now makes more money in a single quarter than Yahoo does in an entire year.

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