Terry Semel’s career heads south

Terry Semel, a former Hollywood movie mogul (and would-be Silicon Valley mogul) has quit under pressure at Yahoo. As a former newspaper reporter, I think Tuesday’s jointly-authored Mercury News story tells it well:

Earlier this decade Yahoo gambled that content and Hollywood would be the key to its success.

Google banked on technology.

Monday's dramatic shake-up at Yahoo, with the ouster of showbiz veteran Terry Semel as CEO and the installation of co-founder Jerry Yang and financial wizard Sue Decker at the helm, is a long-awaited acknowledgment that Yahoo's bet was the wrong one. Yang as chief executive and Decker as president are expected to refocus the Sunnyvale Internet giant on technology.

They later continue:

After failing to buy Google in 2002, Semel bought advertising technology that had inspired Google's business model … Yahoo at the same time focused on content partnerships, often with the Hollywood studios that Semel used to work with. Google focused almost obsessively on improving its core search technology.

The result: Yahoo's value has fallen by more than 35 percent since early 2006. A delay of new advertising software and a steady exodus of talent have prompted concern that the company has lost its competitive edge.

Last week, Semel got beat up at the annual shareholder meeting, and there was no denying the handwriting on the wall. Since Semel has been commuting via executive jet from his Beverly Hills home, presumably he’s now back south in LA where he spent 24 years at Warner Brothers until he quit the chairman‘s job to become Yahoo CEO.

At 64, he’s unlikely to get offers for more than a board seat. Presumably he’ll spend his time planning fundraisers for the Jane and Terry Semel Institute for Neuroscience & Human Behavior at UCLA, renamed in 2004 after the Semels sent $25 million in Yahoo money to the school.

When writing my teaching cases about Live365 and Hollywood vs. Silicon Valley, it seemed clear that Hollywood doesn’t get Silicon Valley. (D'oh!) But actually, I think most of the world doesn’t get SV either — it’s an alien world, with its own culture, management style, labor market and sources of competitive advantage.

I think someone from another US high tech region — San Diego, Seattle, Austin, maybe (or maybe not) Boston — could become a SV executive, particularly if he or she had worked or lived here before and was used to the fruitfly-like job loyalty. I think I could do it, and at least half of the entrepreneurs I’ve interviewed for my San Diego telecom study could do it too. (Why would they want to, since they can do the same thing down south with a better quality of life?)

But hire a telephone company exec, or a movie exec, or a bank exec? Forget it. Semel’s failure has shortened the rolodex of the headhunters seeking to import talent to SV, like Spencer Stuart (who collected millions to place Semel in 2001). Google’s CEO, Eric Schmidt, was a longtime #2 man who wanted to be #1. I’d assume that local names will be now considered for the top jobs from places like the long rank of SVPs at Cisco or Intel, or the division presidents at eBay. One name unlikely to be available is Apple COO Tim Cook — certainly this would be a bad time to jump from Apple to a sinking ship.

Does the failure of Terry Semel say anything about the decision to hire Mark Hurd for HP? Probably not. HP has not been in the innovation business for a long time, and under Hurd they are now succeeding based on execution and operational efficiency — using their superior distribution channels to crush Dell. Two things we know about Google: they don’t rely on others for distribution channels, and pinching pennies is not very high on their priorities.

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