In a note to employees, Bartz says she was fired by the board. Chief Financial Officer Tim Morse will serve as interim CEO.
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Bartz, named Yahoo chief executive in January 2009, is no longer in the job. In a note sent to Yahoo employees this afternoon, Bartz noted that the board fired her.
"I am very sad to tell you that I've just been fired over the phone by Yahoo's chairman of the board," Bartz wrote. "It has been my pleasure to work with all of you and I wish you only the best going forward."
Yahoo said that Chief Financial Officer Tim Morse has been named interim CEO. The news was first reported by AllThingsD.
When Bartz took over the CEO role from co-founder Jerry Yang in January 2009, the company was struggling to become more competitive and profitable. One of her first tasks as CEO was a reorganization of Yahoo in an attempt to make the Internet pioneer faster, simpler, and more responsive to those who use its services. But Yahoo has continued to founder under her leadership, never regaining the ground it lost to Web leader Google.
Rumors that Yahoo's board was secretly considering replacing Bartz had been circulating for months. Yahoo Chairman Roy Bostock declined to address the rumors at the company's annual shareholder meeting in June but did say the board "is very supportive of Carol and the management team." A spokesperson was more adamant, saying at the time, "Rumors suggesting there is or has been any sort of search for a replacement to Carol are categorically untrue."
In a statement this afternoon, Bostock did not disclose the board's reasons for removing Bartz, though he noted the "very challenging macro-economic backdrop" in which she led the company. And he, not surprisingly, was bullish on the company's prospects.
"I am very sad to tell you that I've just been fired over the phone by Yahoo's chairman of the board. It has been my pleasure to work with all of you and I wish you only the best going forward."
"The board sees enormous growth opportunities on which Yahoo can capitalize, and our primary objective is to leverage the company's leadership and current business assets and platforms to execute against these opportunities," Bostock said. "We have talented teams and tremendous resources behind them and intend to return the company to a path of robust growth and industry-leading innovation. We are committed to exploring and evaluating possibilities and opportunities that will put Yahoo on a trajectory for growth and innovation and deliver value to shareholders."
Bartz spent 14 years as Autodesk's CEO before becoming executive chairman in April 2006. Before Autodesk, she worked at Sun Microsystems, 3M, and Digital Equipment Corp.
Morse joined Yahoo in June 2009, a former General Electric executive who came to the company from chipmaker Altera. Before joining Altera in 2007, Morse spent 15 years at General Electric in a variety of senior management positions, including chief financial officer of GE Plastics. Morse has a bachelor's degree in finance and operations and strategic management from the Boston College Carroll School of Management.
For his part, Morse said in a statement that he intends to work with the board to "invest in the organization and continue to drive its ongoing growth plans."
Yahoo also appointed an Executive Leadership Council that will help Morse manage day-to-day operations until a permanent chief executive is appointed. The group will also oversee "a comprehensive strategic review" to improve growth prospects. That group includes Michael Callahan, executive vice president, general counsel, and secretary; Blake Irving, executive vice president and chief product officer; Ross Levinsohn, executive vice president, Americas; Rich Riley, senior vice president, EMEA Region; and Rose Tsou, senior vice president, APAC Region.
Bartz joined the embattled company after a rough year that saw Microsoft launch an unsolicited bid for the company but later walk away after a $33-a-share offer was rejected by Yahoo. The stock has lost more than half its value since then, never recovering to the price Microsoft offered.
The search pioneer was also the target of a proxy fight by shareholder activist Carl Icahn, who eventually joined Yahoo's board as part of a settlement with the company. He stepped down from the company's board in October 2009, and unloaded much of his Yahoo stake the following February.
Yahoo also tried to boost its revenue with an advertising search partnership with Google. But the search giant walked away from the deal when the U.S. Department of Justice notified the companies it would challenge such an arrangement under antitrust grounds. Shortly after the Google deal collapsed, Yang announced he would step down as CEO as soon as a replacement was found.
Bartz's tenure was marked by a challenging turnaround effort that saw many operations being merged or shut down. The company announced last December it would shutter its Yahoo Buzz, MyBlogLog, Delicious, AllTheWeb.com, Yahoo Picks, and AltaVista properties.
Layoffs, which soared at Yahoo prior to Bartz's arrival, remained a staple during her tenure. The company laid off more than 2,500 employees in 2008, and more than 1,000 while Bartz served as chief executive.
Her departure was hailed by at least one former Yahoo executive, Brad Garlinghouse. In 2006, he wrote the widely circulated Peanut Butter Manifesto, complaining that Yahoo was spreading itself too thin, not focusing on important strategy. Upon the news of Bartz's departure, Garlinghouse, now president of applications and commerce at AOL as well as the West Coast lead for its venture capital arm, tweeted: "ding dong the witch is dead."
The news of Bartz's firing came after the stock market closed. But the company's stock climbed in after-hours trading by 90 cents, or 6.97 percent, to $13.80.
Updated at 5:35 p.m. with details and analysis.
Josh Lowensohn contributed to this report.
CNET sat down with Bartz last year. Here's that interview.