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Tickers in this Article: YHOO, GOOG, MSFT, NWS

For Yahoo! (Nasdaq: YHOO) watchers, CEO Terry Semel's resignation last week came as no surprise.

Yahoo has been knocked hard by slowing ad sales and overwhelming competition from online titan Google (Nasdaq: GOOG). It also faces competition from growing networking websites like YouTube and News Corp.'s (NYSE: NWS) and of course Microsoft (NYSE: MSFT). Yahoo shares are down about 36% since the end of 2005. Clearly, change is overdue at the internet giant.

However, does moving Semel from the top spot really help matters?

Same Old, Same Old
The board of directors has elected Yahoo co-founder Jerry Yang as CEO, while Semel stays on board as a director. Former CFO Sue Decker becomes president. If new management offered a strong vision for addressing the company's problems, there might be room for a turnaround, but these changes do little for Yahoo.

In my view, the moves are little more than a re-shuffle. They give investors little hope for a corporate revival.

Giving Yang the top spot is hardly a solution. As a director, Yang has played a role in the company's strategic decision making. He bears responsibility for what has happened to the company.

Yang Lacks Operations Experience
Operational skills are much needed at Yahoo, as evidenced by the delayed rollout of the new Panama advertising. However, Yang has never actually run anything at Yahoo, at least not since the company was a young startup. While he has maintained a strategic role, Yang has little experience with day-to-day operations.

At the same time, it's not clear why Semel is still hanging around on the board. Nor is it obvious if the re-shuffled executive will be permanent. While Yang said he is in for the long term, directors have said the company will be conducting a search - with Decker a leading candidate for CEO. By all appearances, the board is divided over who should lead the company.

That should give investors cause to be worried. Shaky leadership could leave Yahoo poorly positioned to capitalize on its considerable untapped assets.

Share Price Could Fall

Despite the company's problems, the Yahoo portal is still the busiest site on the net, with more than 100 million users. Its search results equal Google's. Yahoo is a household name, but it needs to be managed and led decisively.

Unless investors see signs of strong leadership, shares could easily tumble from their lofty heights. The stock now trades at 48-times 2008 earnings. Google, by contrast, is priced at 32-times earnings. That is a hefty premium, considering Google generates about 40% more revenue per search than Yahoo it leaves zero margin for error.

Improved management could lead a strong revival of Yahoo, but I'm not willing to bet on the current team guiding the shares higher.

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