Yahoo! (YHOO) investors may be asking, Who let the top dogs out?

The exit of Yahoo!'s top European executive, announced Thursday, is the latest in a series of high-level executive departures that have dogged the company over the past year.

Though the turnover doesn't appear alarming, and though other key executives are still in place, the changes add another dimension to the ongoing challenge facing Yahoo!: Building its revenue base and shoring up profits in a weakening market for the online advertising that is a cornerstone of the Internet company's business.

In addition, the 86% decline of Yahoo!'s shares since the beginning of 2000 points up the challenge of holding on to old employees amid the falling value of stock options, and attracting new employees in an era in which equity-based compensation no longer has a lottery-jackpot type of glow.

On Thursday, Yahoo!'s shares rose $2.81 to close at $31.31. In a note issued Thursday morning,

Merrill Lynch

Internet analyst Henry Blodget reiterated Yahoo!,

AOL Time Warner

(AOL)

and

Homestore.com

(HOMS)

as top picks. Blodget said he was encouraged by ad-industry reports that Yahoo! and

Microsoft

(MSFT) - Get Report

had become more attentive to the needs of the advertisers who are their customers.

Leaving Yahoo! Europe, it was announced early Thursday, is Fabiola Arredondo, who joined the unit in 1997. In 2000, European operations amounted to $113.6 million of Yahoo!'s $1.1 billion in revenue, or a majority of the roughly $166 million in revenue that Yahoo! gets from its non-U.S. operations, excluding its minority interest in Yahoo! Japan.

Last year saw the departures of Tony Surtees, general manager of Yahoo!'s commerce group, and Chief Financial Officer Gary Valenzuela, who executed an orderly retirement in June.

"Those three were unrelated events for unrelated, personal reasons," says a Yahoo! spokeswoman. "On a global basis, there's a lot of depth and breadth to our management organization," she says, adding that the company is committed to increasing its "bench strength."