Yahoo has fired chief executive Carol Bartz and replaced her on an interim basis with chief financial officer Tim Morse, ending a rocky two-year run marked by stagnating growth and a bitter rift with Chinese partner Alibaba.
The outspoken Ms Bartz, famous for her salty language, in a two-sentence email to employees said that chairman Roy Bostock fired her over the phone.
Mr Bostock had only just voiced his public support in June for the CEO, a lightning rod for criticism from Wall Street, and known for her tough attitude.
"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," Ms Bartz said in the email.
The company plans to search for a permanent replacement for Ms Bartz.
Yahoo shares jumped nearly 6 per cent on the news, to $US13.65 in after-hours trading.
The stock was trading around $US12 in January 2009, when Ms Bartz joined Yahoo, hoping to engineer a turnaround for a company then slowly ceding market share. In January 2000, near the end of the dot-com bubble, the stock traded at more than $US125 a share.
Chief financial officer Tim Morse will step in as interim CEO, according to a statement from Yahoo, which said that Ms Bartz had been "removed" from her role. Yahoo said it would begin a search for a new, permanent CEO.
Yahoo remains one of the most popular destinations on the web, but the company is facing increasing competition from social networking service Facebook and continuing pressure from search leader Google.
Where to find growth?
The internet company reported a slight decline in net revenue in the second quarter, as efforts to restructure its sales force caused disruptions.
Research firm eMarketer has projected that Facebook would overtake Yahoo this year to collect the biggest slice of online display advertising dollars in the United States.
Management and the board also came under fire after the company's handling of its relationship with China's Alibaba Group, in which Yahoo owns a stake of roughly 40 per cent.
The rocky relationship between the companies came to a head in May when it was revealed that Alibaba had abruptly handed Alipay - one of Alibaba's crown jewels - to a company controlled by Alibaba founder Jack Ma, apparently without Yahoo's knowledge.
"Carol Bartz was brought in to try to organize and streamline the company and frankly she's been able to do that. However, Yahoo is going to need a little bit more than organization and streamlining," said Michael Yoshikami, CEO at fund management company YCMNET Advisors.
"They are going to need a vision of what they want to be in the future. And I don't think investors really understood what that clear vision was."