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2008-11-18 12:22:09
Posted on Tue Nov 18, 2008 4:01AM EST
SAN FRANCISCO - Yahoo Inc. founder Jerry Yang has never concealed how much he
cares about his Internet company.
His emotional attachment is one of the reasons he balked at a $47.5 billion
takeover offer from Microsoft Corp. six months ago. The same devotion finally
led Yang to conclude he should step aside as chief executive, as the company
seeks to bolster its depressed stock price and sagging earnings in an economic
downturn that might prove even more wrenching than the dot-com bust of eight
years ago.
Yang's surrendering of the CEO reins, announced Monday, won't occur until Yahoo
finds a suitable replacement. The Sunnyvale-based company said it is
interviewing candidates inside and outside Yahoo in a search led by its
chairman, Roy Bostock, and the executive recruitment firm Heidrick & Struggles.
It didn't take long for analysts to conclude Yang's departure will clear the
way for a major overhaul that could culminate in Yahoo's sale to Microsoft
something Yang refused to do in May, to the great irritation of shareholders.
"We still believe Microsoft will eventually own Yahoo," UBS analyst Benjamin
Schachter wrote in a research note late Monday. "Jerry moving out of the CEO
role may accelerate this."
Microsoft declined to comment Monday.
Although Yang had publicly expressed his desire to remain at the helm, Yahoo's
board faced intensifying pressure to cast him aside as the company's shares
plunged to their lowest levels since early 2003. The stock fell 19 cents Monday
to close at $10.63 a fraction of Microsoft's last bid of $33 per share in
early May.
Microsoft CEO Steve Ballmer huffily withdrew the offer after Yang sought $37
per share. The negotiating breakdown triggered a shareholder revolt led by
billionaire investor Carl Icahn, who called for Yang's ouster in July.
Icahn reached a truce that put him and two allies on Yahoo's 11-member board,
but he still has been lobbying for Yahoo to pursue a deal with Microsoft that
would either involve selling the company in its entirety or just its search
engine, which ranks a distant second to Google Inc. An Icahn spokeswoman said
the financier had no comment Monday.
Monday's shake-up comes as no surprise, given the challenges facing Yahoo.
"The shareholders were ready to pick up pitchforks and torches," said
technology analyst Rob Enderle. "If Jerry wasn't a founder, he already would
have been gone" months ago.
Bostock made it sound as if the change in command had been in the works for
some time. "Jerry and the board have had an ongoing dialogue about succession
timing, and we all agree that now is the right time to make the transition to a
new CEO who can take the company to the next level," he said.
Yang, who started working on Yahoo with Stanford University classmate David
Filo in 1994, will revert to "Chief Yahoo," a titular role he filled before
replacing former movie studio boss Terry Semel as CEO in June 2007. He will
also remain on Yahoo's board of directors.
"All of you know that I have always, and will always bleed purple," Yang wrote
Monday memo to employees, referring to the company's official color.
Sue Decker, Yahoo's president, is expected to be among the candidates to
succeed Yang, although she has been an integral part of the management team
that has exasperated the company's shareholders.
Dan Rosensweig, who resigned as Yahoo's chief operating officer, also could be
lured back as CEO, or the board could turn to one of its own directors, such as
former Viacom Inc. CEO Frank Biondi or former Nextel CEO John Chapple.
Investors appeared to be pleased with the decision to replace Yang, as Yahoo
shares climbed more than 4 percent in Monday's extended trading.
Yang, 40, had been pursuing a strategy that he thought would prove Yahoo was
worth more than Microsoft was willing to pay, but the rapidly deteriorating
economy made a comeback seem increasingly unlikely.
After squandering the opportunity to sell to Microsoft, Yang tried to boost
Yahoo's profit by forging an advertising partnership with Google.
But that backup plan fell through two weeks ago when Google walked away from
the deal to avoid a court battle with the U.S. Justice Department, which had
concluded the partnership would have throttled competition in the online
advertising market.
Just a few hours after the Google partnership collapsed, Yang publicly said he
thought Microsoft should hook up with Yahoo. But Ballmer threw cold water on
the idea the next day by declaring he doubted a deal could be worked out.
Yang had also been exploring a possible acquisition of another fading Internet
star, AOL, but most analysts panned the idea as a desperation move that
threatened to hurt Yahoo more than it would help.
Although Yang's tenure as CEO is unlikely to be remembered fondly by
shareholders, his legacy as an Internet visionary remains secure.
Yahoo's remarkable rise began in 1994 when Yang and Filo began compiling a
directory of their favorite Web links while working on their engineering
doctorates in a trailer at Stanford University. They initially called their
site "Jerry and David's Guide to the World Wide Web," only to later decide to
switch to an acronym for "Yet Another Hierarchical Officious Oracle."
Yang and Filo became two of the Internet's first billionaires not long after
Yahoo went public in 1996 with fewer than 50 employees on the payroll. At the
height of the dot-com boom, Yahoo's market value stood at $130 billion. It was
less than $15 billion Monday.