After several years of lagging behind Google, Yahoo’s embattled Terry Semel has finally coordinated a graceful exit as the company’s CEO and turned over the chief executive job to co-founder Jerry Yang. Sue Decker, who was formerly CFO and head of the publishing division, takes over as President and will run Yahoo’s day-to-day operations.

The reaction to Semel’s departure and Yang’s re-emergence has been mixed. Clearly, there’s been a need for new leadership at Yahoo, and Yang is a known entity, so that provides some comfort to Wall Street and investors. However, Yang has also played an active role in the company in recent years as a strategist and evangelist, so plenty of people are questioning whether he truly has the vision to turn Yahoo around.

Yang needs to make some bold moves to reinvigorate a culture of innovation at Yahoo if the company is going to compete with Google and Microsoft. Yahoo has stifled more innovation than it has catalyzed in recent years. Just look at acquisitions like Flickr and As soon as both of them were integrated into the Yahoo fold, innovation stopped almost immediately.

And if you take a look at something like Yahoo Groups, you can see a nice service that has critical mass but has missed a huge opportunity to innovate and drive social networking. Yahoo Groups could have been a MySpace or a FaceBook if Yahoo had made the right moves with it.

Yang’s work at Yahoo is much harder now that Google has taken a big lead in search and MySpace and FaceBook have stole the thunder in social networking.

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And here’s a great photo for the occasion from Photographer Thomas Hawk: