Yahoo chairman Roy Bostock fired chief executive Carol Bartz over the phone yesterday, ending a tumultuous tenure marked by stagnation and a rift with Chinese partner Alibaba.

Chief financial officer Tim Morse will step in as interim chief executive, and the company will search for a permanent leader to spearhead a battle in online advertising and content with rivals Google and Facebook.

Shares in Yahoo jumped 6 per cent in after-hours trading. They are scarcely higher than where they were when Ms Bartz first took the reins in January 2009 with hopes of reviving stalled growth and competing with up-and-coming rivals.

Yesterday, her efforts were abruptly halted after Mr Bostock called with the bad news.

"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 outspoken chief executive said in a two-sentence email to employees.

The decision to oust Ms Bartz was reached by an unanimous vote of Yahoo's 8 independent directors late last week, according to a person close to the company. Ms Bartz, and Yahoo co-founder Jerry Yang, who are also on the board, did not participate in the vote, the person said.

The turn of events surprised few Wall Street observers who had tracked a rising torrent of criticism and watched revenue growth falter and sputter out.

Some analysts said Ms Bartz's departure signaled the company had run out of options after failing to dominate the advertising and content markets and handing over its search operations to Microsoft.

That partnership, under which Microsoft handles search for Yahoo's websites and keeps a portion of ad revenue, appears to favor the software company at Yahoo's expense.

Yahoo is still one of the most popular destinations on the Internet but faces increasing competition from social networking service Facebook and from Google, which has a market value of $170 billion, ten times more than Yahoo.

Yahoo said that a newly-formed executive leadership council would help Mr Morse in managing day-to-day operations as well as supporting "a comprehensive strategic review" to position the company for future growth.

Yahoo has not hired investment banking advisors, according to the person close to the company. But the person said the company was likely to meet with various banking firms in the coming weeks.

At least three private equity firms had reached out to at least one media firm to gauge acquisition interest two weeks ago, said a second source with direct knowledge of the approaches who declined to be identified because the talks were preliminary.

The source added that other media companies might have been approached as well, but he had no direct knowledge of that.

A takeover of Yahoo would mark yet another change for a company that helped define the Internet two decades ago, but has been unable to keep up.

Yahoo is currently worth about $16 billion, with much of that ascribed to its roughly 40 per cent stake in China's Alibaba, the parent company of websites including Alibaba.com and Taobao. Yahoo also owns a stake in Yahoo Japan, along with Japanese mobile company Softbank .

Relations between Yahoo and Alibaba have soured in recent years with Alibaba founder Jack Ma failing in its attempt to buy out its US partner's stake.

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 Mr Ma, apparently without Yahoo's knowledge.

Mr Bostock voiced his public support in June for Ms Bartz, a lightning rod for criticism from Wall Street, and known for her tough attitude and salty language.

Ms Bartz's ouster capped a decade-long fall from grace for a company whose shares traded at more than $125 in January 2000 during the dotcom bubble - but now languishes at about a 10th of that level.

Ms Bartz arrived at Yahoo in January 2009 after a strong showing at software giant Autodesk with high hopes of turning around Yahoo, after co-founder Jerry Yang was widely thought to have botched a $47.5 billion proposed takeover by Microsoft, rebuffing that advance as too low.

The internet firm 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.

Reuters