Yahoo In Turmoil: CEO Mayer Fires Her No.2 Henrique De Castro

There is unrest in Silicon Valley. In a move that surprised many, Yahoo CEO Marissa Mayer has just dismissed her second in command, Chief Operating Officer Henrique De Castro. Looking at the way the dismissal was handled and the communication that followed tells us that it wasn’t a friendly separation.

When Marissa Mayer left Google in July 2012 to become the President and CEO of Yahoo, her remit was clear: to turn the company fortunes around. Yahoo was losing ground to competitors such as Google and Facebook, advertising revenues were shrinking and something needed to be done.

Mayer’s first major hire was Henrique De Castro, who also came from Google, where he was VP of Google’s Partner Business Solutions group. De Castro was tasked with boosting the advertising revenue to help turn around the struggling internet portal company. For this, he was generously rewarded: According to Forbes, De Castro became one of the highest paid executives in Silicon Valley, making $39 million a year as COO at Yahoo (apparently more than Mayer). Bloomberg reports that upon departure, he will now receive a $64.6 million severance package, including accelerated equity grants.

So far, Yahoo has failed to make up any lost ground. According to the Economic Times, Facebook knocked Yahoo off second place among digital advertising sellers in the US. In a market where Google holds the biggest share with about 40%, Yahoo now sits at 5.8%, compared to Facebook, which now has 7.4%. Even worse, according to the BBC, display advertising revenue at Yahoo fell by 7% in the last quarter of 2013.

Among these unsatisfactory results, Mayer has been disappointed with De Castro’s efforts to boost growth. In an internal memo to staff Mayer said very clearly that she made the decision that de Castro should leave. The memo, published by re/code, also states at the end: “Overall, I am confident that the leadership team, our direction, and these changes will enable even more successful execution.” Unusually, in none of the communications was any praise for De Castro’s service.

From where I am sitting, I am seeing an Internet company that continues to struggle (or indeed, fail). I am also seeing obvious quarrels at the very top of that company. And don’t even get me started on the severance package for another executive that delivers disappointing results. Anyway, what do you think? Do you see a future for Yahoo? Any views on Mayer’s or De Castro’s performance so far? Please share your views…

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