Yahoo! Inc. said Chief Executive Officer Scott Thompson isstepping down after failing to correct errors in his credentialsand the company is revamping its board, handing a victory toactivist investor Daniel Loeb, who had pushed for the overhaul andsaid the Web portal is mismanaged.

Ross Levinsohn, Yahoo's head of global media, was named interimCEO, and director Fred Amoroso will become chairman, the Sunnyvale,California-based company said in a statement yesterday. Amorosoreplaces Roy Bostock, the non-executive chairman, who is exitingthe board immediately. Yahoo agreed to add Loeb to its board alongwith two other directors nominated by his fund, Third Point LLC, toend a proxy fight.

Third Point, which owns about 5.8 percent of Yahoo, stepped uppressure on Yahoo since flagging discrepancies in Thompson's resumeon May 3. The departure of Yahoo's third CEO in just over threeyears adds to upheaval at a company that was once a leader in Websearch and online information. Yahoo's sales tumbled 31 percentlast year from a peak three years earlier, and its market value hasdropped by more than half since the end of 2005.

“The company is starting from scratch yet again,” Ben Schachter,an analyst at Macquarie Capital, said in an interview. He has aneutral rating on the stock and doesn't own it. “Scott put them ina very difficult position, and something had to happen.”

Thompson, 54, was brought on in January to orchestrate aturnaround at the struggling Web portal after Google Inc. andFacebook Inc. lured users and advertising dollars.

“This is a damaged company and a company competing in a spacethat's moving incredibly fast,” Schachter said.

Thompson's undoing stems from erroneous biographical referencesthat said he held a bachelor's degree in computer science fromStonehill College. A former EBay Inc. executive, he earned a degreein accounting from the Easton, Massachusetts-based school, and theinformation is correctly listed in EBay regulatory filings and someYahoo press releases. Yet the incorrect degree showed up in Yahoo'sApril 27 10-K filing, as well as on the company's website.

'Importance for Industry'

Before resigning as chief executive, Thompson told the directorsand several colleagues that he has been diagnosed with thyroidcancer, the Wall Street Journal reported today, citing peoplefamiliar with the matter it didn't identify.

An e-mail sent to Dana Lengkeek, a spokeswoman for Yahoo, duringnon-business hours wasn't immediately returned.

In addition to Loeb, Third Point nominees Harry Wilson andMichael Wolf will join Yahoo as directors. A fourth nominee,Jeffrey Zucker, said in yesterday's statement that he withdrew hisnomination to allow a quick transition.

“We're particularly enthused by the addition of the new boardslate,” Brian Wieser, an analyst at Pivotal Research Group, wrotein a research note. “Loeb, Wolf and Wilson appear to be focusedupon restoring Yahoo's importance for the industry, and from ourobservations, care very much about the opportunity.”

Leaving the board immediately are Bostock, Patti Hart, GaryWilson, Arthur Kern and Vyomesh Joshi, Yahoo said. Previously, thecompany had said they wouldn't stand for re-election at the annualshareholders meeting. Third Point also had suggested Hart'sacademic credentials weren't accurate, though a review by the boardof International Game Technology, where she is CEO, found “nomaterial inconsistencies,” IGT said last week.

Yahoo shares fell 1.6 percent to $15.19 in New York on May 11and have declined 5.8 percent so far this year.

Thompson, the former president of EBay's PayPal unit, was hiredin January to replace Carol Bartz, who had been dismissed byYahoo's board in September amid falling sales and market-sharelosses. Chief Financial Officer Tim Morse was named interim CEOafter Bartz's departure.

Thompson had cut 2,000 jobs and overhauled management, andYahoo's stock had its biggest rally in three months on April 18after the company reported first-quarter sales that toppedestimates, fueling optimism that turnaround efforts might takehold. A day earlier, Yahoo reported its first revenue gain in morethan three years.

“The company is in a precarious position,” said Paul Sweeney, asenior analyst with Bloomberg Industries. “Probably the best thingand the easiest thing to do is to make this change.”

Third Point Negotiations

Third Point had been locked in a dispute with the company aboutits direction and appointments to the board, calling Yahoo one oftechnology's “most mismanaged companies.”

The fund faulted Thompson in April for embarking on job cutsbefore he articulated a more complete strategy, and it criticizedearlier management for failing to accept a $44 billion takeover bidfrom Microsoft Corp.

Yahoo named three new independent directors in March as part ofan effort to shake up the board and appease investors. The companynegotiated with Third Point's Loeb about adding one of his nomineesand another that both sides could agree on, though the discussionsbroke down when Loeb insisted that he himself be added, Yahoo saidat the time. The fund announced plans in March to seek shareholdervotes for its slate of four directors.

After the disclosure of the resume error, Yahoo initially calledthe discrepancy an “inadvertent error” and said it “in no wayalters that fact that Mr. Thompson is a highly qualified executivewith a successful track record leading large consumer technologycompanies.”

Yahoo later formed a review committee led by Amoroso, who joinedthe board in February. The other directors named to the panel wereJohn Hayes and Thomas McInerney, who both joined the board inApril. The committee also retained independent counsel, Terry Birdof Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenbergin Los Angeles.

Thompson, in a memo to staff on May 7, apologized for thefallout from the disclosures and said he takes “fullresponsibility.”

“I want you to know how deeply I regret how this issue hasaffected the company and all of you,” Thompson said.

PayPal, owned by San Jose, California-based EBay, has servicesthat help retailers and individuals exchange funds for purchases orpayments, even without a credit card. As president, Thompsoncontributed to an increase of the payment service's users from 50million to more than 100 million, helping it close in on a goal ofrevenue as high as $7 billion by 2013, compared with about $3.3billion in 2010.

Compensation

Thompson also engineered the company's expansion to online dailydeals and mobile payments.

In addition to PayPal, Thompson's past jobs included overseeingglobal technology for Visa Inc.

Thompson's four months of work at Yahoo were lucrative, and hispotential compensation was set at as high as $27 million when hejoined. Besides an annual base salary of $1 million, he received ahiring bonus of $1.5 million in cash and $5.5 million in stock,according to Yahoo's agreement letter filed with the U.S.Securities and Exchange Commission.

He also was set to receive a so-called inducement equity awardin February worth $5 million, regulatory filings show. Thompson waseligible for incentive compensation of as much as twice his annualsalary, depending on performance, with the bonus guaranteed to beleast $1 million for the fiscal year.

Thompson also was slated to receive an additional $1 millionstock award in March 2013 and to get long-term equity grants thatwere projected by the company to be worth $11 million for 2012,according to the regulatory filing.

Bloomberg News

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