Terry Semel, chief executive of internet search firm Yahoo, has resigned. Semel, who had been CEO since 2001, will take on the role of non-executive chairman but will no longer be involved in the day-to-day running of the business.

Semel had been had been under pressure for some time over the firm''s disappointing results — Yahoo suffered a 16-per cent fall in profits in the first three months of 2007 — and the growing dominance of archrival and search engine market leader, Google.

Yahoo co-founder Jerry Yang, who helped launch Yahoo in 1995 while still at Stanford, has replaced him.

Though it has 500 million users worldwide, in recent years Yahoo has been losing market share and being criticised for poor technology and a lack of innovation. It accounts for about 26 per cent of all online searches in the US, well behind Google, which has a market share of over 49 per cent.

Announcing his departure, Semel said, "This is a time for new executive leadership, with different skills and strengths, to step in and drive the company to realise its potential," he said and added, "It is the right thing to do and the right time is now."

Semel joined Yahoo following the collapse of the dotcom boom and helped to revive its business even while Google became a formidable foe.

Though Yahoo acknowledged in a statement that the past year had been a "difficult one", it also stressed on the progress it had made in key areas such as developing advertising search functions and building its presence in video and on mobile platforms.

Yang, 38, created the original Yahoo search engine in 1995 along with David Filo before helping to take it public a year later. Since then, he has been involved in overseeing corporate strategy, technological development and international expansion.

Yahoo has repeatedly been linked with a deal with Microsoft to try and counter Google''s increasing supremacy in the online searches. The two deny it as speculation, the two are reported to have held informal merger talks last year and discussed possible co-operation earlier this year.