Yang Exits, What's Next for Yahoo?

The tumultuous year and a half tenure for Jerry Yang at Yahoo (Yhoo) NASDAQ is about to come to an end.  Yang,  a co-founder of the once formidable Internet and search company, returned to Yahoo in July 2007.  He returned in what many considered as the “white knight” to replace former CEO, Terry Semel.  Semel, who was not a technologist, had tried to expand Yahoo into a media company as a way to compete with its prime competitor Google.  Semel’s efforts had been failing and Yahoo continued to lag and fall further behind Google.  Expectations on Yang’s return and leadership also failed to turn out as hoped.  During Yang’s short-lived tenure the firm has only seen its fortunes continue to decline.  According to a piece in CNN,

Things only got worse for Yang, due to both his own and previous management missteps and also external forces, including a hostile takeover attempt by Microsoft (MSFT), which was followed by a proxy fight by activist shareholder Carl Icahn.     

Yahoo also saw its search business decline and its strong graphical ad business suffer in the midst of the current economic meltdown.

There has also been an exodus of major executives over the last year, along with recently announced layoffs of 10 percent of the company, which are set to take place December 10.

In addition, Yahoo’s controversial search ad with Google (GOOG) recently collapsed, and its talks to merge with Time Warner (TWX) online unit AOL have dragged on.  

Yahoo has initiated a CEO search with the help of executive search firm Heidrick and Struggles.  Many names are being bandied about as a possible successor to Yang.  A number of the names being suggested include a former Microsoft executive and current Microsoft executive who according to some analysts might help to increase the likelihood of a deal with Microsoft.  Two names being raised are Kevin Johnson and Brian McAndrews.  Johnson originally headed Microsoft’s first attempt to buy Yahoo.  He recently left Microsoft to become the CEO of Juniper Networks (see earlier blog).  It is difficult to imagine he would leave that position at this point to head up Yahoo.  McAndrews is with Microsoft and is currently SVP of the Advertising and Publishing Solutions Group.   Other individuals include Susan Decker, the current president of Yahoo and a close associate of Yang’s along with Peter Chernin of the News Corp., Jan Miller former AOL head, Meg Whitman former head of eBay and others. Whoever is chosen to replace Yang will be on the hot seat.    

My own guess is someone from the outside will be chosen and possibly a name not yet being floated.  It is nearly impossible to conceive of any successor who will be able to run Yahoo as an independent firm going forward.  Some kind of deal will need to be made.  For the moment, Microsoft will remain on the sidelines until a replacement for Yang is found.  Once this happens we will see whether Microsoft jumps back into the fray.  Stay tuned, this sure to be an interesting but bumpy ride.   

For more:  

MarketWatch

Wall Street Journal 

ZD Net  

Minyanville  

SeekingAlpha  

Silicon Valley/San Jose Business Journal 

Cnet (Yang Memo to staff)  

Silicon Alley Insider  

Deal.com  

CEO Watch - Jerry Yang, Yahoo

The rumors are beginning to fly now that Microsoft has walked away from Yahoo. Today Zachary Kouwe wrote a piece in the NY Post entitled, Investors May Yank Yang, Filo over Dough. According to the story,

Several hedge funds with large positions in Yahoo! have written letters to the board and to Yahoo! President Sue Decker explaining their displeasure at how Microsoft's hostile offer was mishandled, sources close to the funds said.

Shareholders are particularly irked that Yang and co-founder David Filo negotiated with Microsoft last weekend without any representative from the board or their advisers.

The dance is probably not over with Microsoft. For now, Yang will need to find ways to convince shareholders Yahoo can turn itself around, a tall order. According to an AP story on MSNBC Yang is still open to working out a deal with Microsoft.

If Microsoft returned with a “real offer and a real proposal,” Yang said, “we would be happy to listen.”

Yang figures to get an earful from irate shareholders at the annual meeting. Yahoo finally set the meeting for July 3 after indefinitely postponing it in early spring as part of its effort to foil a possible hostile takeover attempt by Microsoft.

Now it may be Yahoo’s shareholders who try to oust Yang and the rest of Yahoo’s board instead of Ballmer, who had threatened an attempt to dump the 10 directors if they didn’t accept Microsoft’s offer.

Reuters Deal Zone quotes The New York Times and Wall Street Journal,

“I am extremely angry at Jerry Yang and at the so-called independent board,” Crawford told the Times. ”I’m hoping that there is such an outpouring of outrage that the board is embarrassed into revisiting this thing … but I’m not optimistic about that.”

I don't think Yang is on the way out but we will just have to wait and see how this all plays out.

For more:

International Herald Tribune
Newsfactor