Tim Koogle is stepping aside as chief executive of struggling Internet bellwether Yahoo! Inc., though he will stay on as chairman.
The company also announced Wednesday that its first-quarter earnings will fall well short of Wall Street's expectations.
Koogle, who will remain in the CEO post until a replacement is found, gave no specific reason for leaving but said he and the company's board had decided on "building out our senior management bench strength across the company in order to prepare for our next stage of growth."
Adding to the recent spell of bad news in the high-tech world, Yahoo said it expected to break even in the first quarter, which ends March 31, excluding one-time charges. Analysts surveyed by First Call/Thomson Financial had been expecting earnings of 5 cents per share, down from 10 cents per share a year ago.
Yahoo said it was being hurt as the weakening economy forced advertisers to cut back on their marketing. The company also is encountering difficulties as its advertising base shifts from Internet businesses to more traditional companies.
"All businesses in the United States are facing challenging economic conditions that have weakened further in recent weeks, and as consumer confidence and spending has deteriorated, a broad range of customers have delayed their spending across all media formats until their economic outlook improves," Koogle said.
Trading in shares of Yahoo was halted shortly after the markets opened Wednesday following the company's cancellation of an appearance at an Internet conference in New York. Shares had dropped 6 percent, or $1.38, to $21 on the Nasdaq Stock Market.
After being halted for almost all of the day, shares of Yahoo fell $2.56, or 12 percent, to $18.44 in after-hours trading.
Koogle joined Yahoo after serving as president of Seattle-based Intermec Corp. and spending nine years as an executive at Motorola Inc. He became Yahoo chairman in 1999.
"This guy has a lot of background here, been there from very early on, and has done a real good job," said John Corcoran, an analyst with CIBC World Markets Corp. He said finding a replacement would be difficult — like "getting someone to step in front of an avalanche," considering the downward momentum of the company's stock and the Internet economy.
After starting as a search engine in the mid-1990s, Yahoo grew into a full-service information and shopping portal and became the world's most popular destination on the Internet. Yahoo also was one of the Internet's biggest financial success stories for a while, with revenue nearly doubling last year, to $1.1 billion, and profits of $291 million.
But the company's dependence on advertising — which accounted for nearly 90 percent of last year's revenue — has proven to be problematic in the dot-com meltdown and the overall slowing of the economy. Yahoo's stock has plummeted from its 52-week high of $205.63, set last March 22.
"It's been a real tough quarter for Internet advertising," said Abhishek Gami of William Blair & Co.
In recent weeks, the company's heads of operation for Asia and Europe have stepped aside.
For months, rumors have circulated that Yahoo would merge with another company, most likely an entertainment titan such as Disney or Viacom that could help it compete with the AOL-Time Warner behemoth.
Koogle, however, has been saying a deal like that actually could reduce the site's highly valued breadth of content. And, last week, Yahoo adopted a shareholder rights plan, known as a poison pill, that would likely deter any attempt at a hostile takeover. The company said the plan was not "in response to any effort to acquire control of Yahoo."
Yahoo also announced a stock repurchase program Wednesday of up to $500 million of its outstanding shares over the next two years.
