Terry Semel’s future at Yahoo! has been thrown into fresh doubt after the chief executive’s handling of poor earnings news was criticised by investors and analysts.

Shareholders were unimpressed by Mr Semel’s failure to answer questions at a meeting on Tuesday about Yahoo!’s 11 per cent drop in quarterly profits, leaving other executives to explain. The company’s shares plunged 9 per cent, wiping $4 billion (£2 billion) off its market value.

Brian Bolan, an analyst at Jackson Securities, said: “Some may think that the underwhelming performance of Yahoo! in the quarter, accompanied by higher costs, higher stock-based [compensation] and a virtually invisible CEO . . . could be a sign of a change at the top in the near-term. We tend to agree.”

Yahoo! shares extended their losses yesterday. Despite the slide, Mr Semel, who has invested heavily in a new search-based advertising system called Panama, said that he was satisfied with the performance. “The results . . . were exactly what we expected,” he said.

Rumours of a likely management purge gained ground as Yahoo! revealed that Dominique Vidal was leaving as head of the European division. The move is the latest in a number of high-profile departures.

The squeeze on Mr Semel, the former Warner Brothers boss, is likely to worsen today, when Google announces its quarterly results. Already the runaway leader in search-based advertising, Google last week beat Yahoo! in the race to buy DoubleClick, the biggest independent broker of online display — or banner — adverts. The $3.1 billion deal gives Google massive presence in an area where Yahoo! previously held the upper hand.

Under Mr Semel, Yahoo has set its sights on Google’s core search business, billing Panama as its key weapon. While most analysts are willing to wait until the second quarter for evidence of its impact, there are growing indications that the grace period will be brief.

Times Recommends

• Tories’ green bank to revolutionise power policy
• UK car industry receives £2.6bn injection
• Pru chief turns down seat on board of bank