Yahoo’s chief executive has pushed through a sweeping reorganisation – including a senior management overhaul – in an attempt to bring back faster growth to the flagging internet giant.

Terry Semel said on Tuesday night he would scrap Yahoo’s many separate product groups and replace them with two divisions: one focused on users and the other on advertising.

The changes – including the departure of Dan Rosensweig as chief operating officer and plans to hire two new members to the top management team from outside the company – represent the biggest shake-up since Mr Semel arrived in the depths of the dotcom bust in 2001.

Lloyd Braun, a former ABC television executive who was hired two years ago to spearhead a push by Yahoo into the media business, also quit on Tuesday. His position had been in question since earlier this year, when Yahoo backed away from its earlier ambitions to become a large-scale creator of online content.

The overhaul, code-named Project Soufflé, comes in the wake of mounting evidence that Yahoo has lost momentum in its efforts to catch up with Google, while also ceding ground to social networking and other community-based internet sites such as MySpace and YouTube.

Internal dissension over Yahoo’s woes spilt into the open late last month with the leak of a memo from a senior executive that accused the company of following a “peanut butter” strategy, by spreading itself too thinly in too many areas.

Mr Semel defended his earlier decision to impose a product focus when he arrived at the company, arguing that it had been “a very good plan and it served very well” given the state of development at the time. Since then, it has been blamed for leaving many overlapping fiefdoms in the company and a lack of focus on user needs.

Yahoo said one of the new divisions, charged with building online audiences, would act as a consumer group, segmenting the company’s users more clearly and creating services for each. The other would focus on advertisers and other online publishers, in an effort to replicate the success that Google has had in establishing itself as a network for distributing online advertising far beyond the audiences that come to its own websites.

Sue Decker, chief financial officer, was named to run the advertiser and publisher division, while Yahoo said it had started a search outside the company for both a head of the audience group and a new CFO.

Mr Semel said he would conduct a four-week review of other management positions, adding: “We have great bench strength in the company, but at the same time I want to leave the door open to bringing in more talent.”

Mr Rosensweig, one of Mr Semel’s first hires as he tried to rein in an earlier period of over-expansion, will be the most visible casualty. He will leave in March. Mr Semel refused to say if he had been offered a senior role in the new organisation.

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