Yahoo’s Yang Yields

yahoo-logo.jpgYahoo Adrift After Yang Announces Resignation As CEO

Chief Executive Jerry Yang has agreed to give up his position, leaving the struggling Internet giant without a clear leader and increasing the possibility an acquirer might seek to buy it.

Yahoo, which earlier this year was the target of a $47.5 billion unsolicited takeover attempt by Microsoft Corp.  said Monday it had hired a search firm to look for a successor to Yang, who co-founded the 13-year-old company while he was a graduate student at Stanford University.

Yahoo said it would consider internal and external candidates for the job. Yahoo President Sue Decker is one of the candidates under consideration, a person familiar with the situation said. It wasn’t clear why the company hadn’t immediately appointed her as chief executive or why Yang’s resignation was announced without a successor already chosen.

The new CEO will face a series of difficult challenges, including trying to turn around Yahoo’s slumping online advertising business. The new CEO might also be thrust into the difficult position of trying to strike a deal with potential acquirers from a very obvious position of weakness.

“This is a company that could use additional executive experience, but you still have the same strategic issues,” said Colin Gillis, managing partner at Click Capital Research.

Reaction to the news, first reported by The Wall Street Journal, was quick. Yahoo shares, which had fallen 1.8% to $10.63 during the regular session, jumped to $11.10 in after-hours trading. Three months ago, Yahoo shares were trading at twice that level.

Yang has been under intense shareholder pressure ever since he rejected Microsoft’s offer earlier this year. Calls for his resignation have only increased as Yahoo’s business has deteriorated with the slumping economy.

The company, once the leader in Internet advertising, has been losing share in the market for Internet search to Google Inc.  and it has been unable to make as much money per search as its larger rival. Yahoo has also been hard hit by the weakening economy because it is more heavily exposed to the slumping online display advertising market.

Yang’s dwindling options were recently reduced even further when Google pulled out of a search advertising pact that would have generated hundreds of millions of dollars in additional revenue for Yahoo.

The collapse of that deal prompted Yang to publicly declare he was open to clinching a deal with Microsoft. At one point, Microsoft offered $33 a share to buy the company.

“To this day, I’d say the best thing for Microsoft to do is buy Yahoo,” Yang said at a conference earlier this month. “We’re willing to sell the company.”

Microsoft Chief Executive Steve Ballmer, however, said at one point Yang was an impediment to striking a deal with Yahoo. The company has maintained it was no longer interested in buying Yahoo. Analysts, however, say if Microsoft is serious about mounting a credible challenge to Google, it had no clear choice other than to revisit an acquisition of the company. Microsoft declined to comment.

In addition to battling outsiders, Yang has also had to contend with restive shareholders. Activist investor Carl Icahn, who is Yahoo’s biggest shareholder and earlier this year forced himself onto Yahoo’s board, has continually pressured Yang to consider selling the company. Icahn, who earlier pushed for Yang to sell the company to Microsoft, recently said the company ought to strike a search deal with the software giant.

Icahn didn’t return a call seeking comment.

Yang, who took over as CEO in June 2007, has been plagued with challenges. Initially tasked with trying to revive Yahoo’s slumping online advertising business, he introduced a series of strategic and technical initiatives late last year. But Wall Street remained unconvinced, setting the stage for Microsoft’s takeover bid earlier this year.

In a press release, Yahoo Chairman Roy Bostock suggested Yang’s decision was amicable and came after long discussion inside the company.

“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,” Bostock said in a statement.

Yang, who will remain CEO until a successor is named, will return to a less formal but still-visible role within the company and remain on its board, Bostock’s statement said.

Yang, who immigrated to the U.S. from Taiwan as child, created Yahoo in 1994 with fellow Stanford University graduate student David Filo. The two envisioned the site as a directory of material available in the growing online world, a concept that still underscores the feel and operation of the Web site.

The concept quickly grew popular and by 1995, well before the birth of the commercial Internet, Yahoo was regularly getting 200,000 visitors a day. In 1995, Yang and Filo, who had dubbed themselves Chief Yahoos rather than take on more corporate titles, got early support from venture capitalist Michael Moritz at Sequioa.

A year later, Yahoo was employing 39 full-time staffers, including 19 people, known as “surfers,” who categorized Web sites vying for a coveted place on the company’s list. In 1996, Yahoo sold its shares to the public in an initial offering underwritten by Goldman Sachs & Co. The deal made Yang and Filo instant millionaires, as well as symbols of the Internet bubble that was beginning to inflate in Silicon Valley.

For a while, Yahoo was the undisputed king of the Internet, charging ever- higher prices for advertising. But the company began running into problems, finding it harder to develop new revenue streams. It also faced new challengers, most notably Google, a search engine that used a mathematical approach to finding information on the Web.

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