Privately-owned Bertelsmann, home to musicgroup BMG Entertainment and publisher Random House, said it wasreplacing Middelhoff with Gunter Thielen--a long-servingBertelsmann executive seen as a safe pair of hands.
Highflier Middelhoff had long battled withBertelsmann's traditional old guard as he went on acrusade to modernize the secretive newspaper and bookpublisher, and build an empire to challenge the likesof AOL Time Warner and Disney.
His surprise exit immediately sparked rumors that the49-year-old German might become the new chiefexecutive of Deutsche Telekom after the ouster of Ron Sommer earlier this month.
But some sources close to the company said it was toosoon to say what Middelhoff would do next and arepresentative for Telekom declined to comment,saying, "We will not get involved in speculation."
Bertelsmann's conservatively minded shareholders hadgrown increasingly concerned about Middelhoff'sadventurous nature and grand plans for the Internet, asthe media industry tried to grapple with tumbling advertisingrevenue.
Middelhoff's departure comes after the ouster of two otherhigh-profile media chiefs this month--VivendiUniversal Chief Executive Jean-Marie Messier and AOL Time Warner COO Robert Pittman.
"The reasons for the departure were differences inviews between the chief executive and the supervisoryboard over the future strategy of Bertelsmann, andover cooperation between the supervisory board andmanagement," Bertelsmann said in a statement.
Taking the helm of the German giant four yearsago, Middelhoff engaged in a frenzy of deals to createthe world's fifth biggest media group, which he plannedto take public.
But the company, based in the isolated German town ofGutersloh since it was founded in 1835 as a publisherof hymn books, remained highly conservative at heart.
Bertelsmann Chief Financial Officer Siegfried Luther--often viewed as Middelhoff's right hand--also was appointed deputy CEO in Sunday's reshuffle.
The company said the new management team "stood forcontinuity in the further global development of thecompany," but it was not immediately clear what thechange would mean for the group's plans for a stockmarket flotation.
The drive to list Bertelsmann had been a key part ofMiddelhoff's long-term strategic vision, but it tooksome effort to win over Rheinhard Mohn, the80-year-old philanthropist who essentially controlsthe company as head of the main shareholder, theBertelsmann Foundation.
Last year, Bertelsmann opened the way for a flotationby swapping 25 percent of its shares with Belgianinvestment house Groupe Bruxelles Lambert.
Groupe Bruxelles has the right to sell the stake in a stock marketlisting by the middle of the decade, a move seen as astepping stone to the market for Bertelsmann.
With shares in listed media companies worldwideslumping under the impact of market uncertainty andflagging advertising revenue, no move is expected atthe moment, however.
While Bertelsmann has been hit hard by the advertisingslump--especially its pan-European broadcaster RTLGroup--analysts had noted that it was difficult to ascertainhow bad things really were at the German group.
Bertelsmann's supervisory board's chief GerdSchulte-Hillen had been particularly concerned aboutMiddelhoff's grand plans and convinced the group'scontrolling shareholders, the Mohn family, that theyneeded a safer leader at the helm.
Middelhoff's replacement, 60-year-old Thielen, is seenas just that, having served with Bertelsmann for morethan 20 years. Until now he was running the group'sArvato division.
Middelhoff's name has already been mentioned among possible candidates to replace former Telekom chief Sommer, who was forced out 10 days agoafter being blamed for a disastrous fall in thecompany's share price.
Telekom appointed supervisory board member HelmutSihler as interim CEO, and gave him the task of finding apermanent replacement for Sommer by the end of theyear.