Yahoo's Yang to step down as CEO

Co-founder giving up top spot following failed talks with Microsoft, collapse of Google deal

After failed buyout talks with Microsoft Corp., an online advertising deal with Google Inc. that fell apart and two rounds of layoffs, Jerry Yang is stepping down as CEO of Yahoo Inc., the company said late Monday.

Yahoo announced that it has begun searching for a new leader. Yang, a Yahoo co-founder who became CEO in June 2007, will reassume his former title of "Chief Yahoo" once a successor is found and will also remain on the company's board.

The 40-year-old Yang has been under intense pressure from shareholders in recent weeks for a string of perceived missteps that began in February with Microsoft's $45 billion offer to buy Yahoo. Microsoft was offering $33 per share for the Internet company, but Yang rejected that price as too low.

Jerry Yang steps down as CEO of Yahoo
Yahoo co-founder Jerry Yang will step down as CEO and return to his "Chief Yahoo" role.

Eventually, Microsoft withdrew its offer. Yang went on to hold talks with News Corp. about a venture with that company's MySpace unit and with Time Warner Inc. about a merger with its AOL subsidiary, but those discussions also came to nothing. In June, he struck the ad deal with Google, but that fell apart in the face of opposition from the U.S. Department of Justice.

With Yahoo shares currently trading at less than $11 per share, the Microsoft offer looks like a very attractive one with the benefit of hindsight — thus the discontent from some shareholders.

Yang appeared to recognize this: During a keynote session at the Web 2.0 Summit in San Francisco two weeks ago, he made a thinly veiled invitation to Microsoft to come back to the negotiating table.

"To this day, I would say that the best thing for Microsoft to do is to buy Yahoo," Yang said. And when quizzed on whether he would stick to the higher price that he demanded back in May, he added, "Oh no. At the right price, whatever the price is."

But Microsoft CEO Steve Ballmer didn't bite. "We are not interested in going back and re-looking at an acquisition," Ballmer said a couple of days later. "I don't know why they would be either, frankly. They turned us down at $33 a share."

The move to appoint a new CEO isn't surprising, said Greg Sterling, an analyst at Sterling Market Intelligence. "There had been public speculation about this for several months, and as they went through several quarterly earnings calls and the condition of the company wasn't improving, I think there was some sense that you needed new leadership," he said.

Sterling credits Yang with some good ideas for turning around Yahoo, such as the company's Open Strategy plan to open up its Web sites and online services to outside developers. But, Sterling said, "there's a way in which maybe his personality isn't well suited for what the company needs, which is maybe a more forceful leader who can restore confidence."

Other factors also likely played a role in leading to today's announcement, according to Sterling. "I think it's not so much a Microsoft thing as it is the demise of the Google deal and a failure to find another alternative to the merger," he said. He added, though, that a cynic's view of Yang's departure as CEO is that installing a new leader at Yahoo "saves face for everyone" and could let Microsoft make a deal with someone other than Yang.

Yang was seen by many as the main impediment to a deal with Microsoft, but that doesn't mean a deal is now much more likely to happen, said Altimeter Group analyst Charlene Li. "The board was behind him and they're still there, and Yang is still there, so I don't think a Microsoft deal is imminent," she said.

Speculation will turn now to Yang's replacement. Yahoo President Sue Decker is one obvious candidate, but the fact that she wasn't named immediately as Yang's replacement raises a question about whether she will be chosen. "She's got to be in the running for it; she's very good," Li said.

Li praised Yang as being very smart and a "tremendous asset" for Yahoo, especially for helping to put in place the Open Strategy tack as a way to drive more traffic to its Web sites. But Yang hasn't been so good at communicating the strategy and energizing users as well as Yahoo's business partners and advertisers, she added.

"He could probably get there eventually," Li said. "But it takes a different type of skill to get that buzz back and get people excited about Yahoo again."

In its announcement, Yahoo said it will consider both internal and external candidates to replace Yang. Chairman Roy Bostock is leading the search process, working with Yahoo's independent directors "and in consultation with Jerry Yang," said the company, which added that it has hired executive-search firm Heidrick & Struggles International Inc. to help as well.

Copyright © 2008 IDG Communications, Inc.

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