By Mike Caggeso
Associate Editor
Money Morning
Jerry Yang, Yahoo Inc.’s (YHOO) co-founder and chief executive officer, today (Tuesday) stepped down from his post under heavy shareholder pressure.
Yang will return to his former role as board member and “Chief Yahoo!” – a non-so-flattering, if not ironic, title considering the heavy criticism he took in the past year – upon the appointment of his replacement.
Yang was elected CEO in June 2007, his second go-around at that post. Since then, Yahoo’s market value has fallen by more than $20 billion, according to Bloomberg.
To be fair, Yahoo was already losing its market share to Google Inc. (GOOG) and a healthy percent of its share value as a result.
But Yang was brought back to fix that.
There was a deep feeling within Yahoo’s ranks that Yang wasn’t fit to continue leading the company out of the mire – or least into a profitable merger/acquisition situation – because he had burned too many bridges trying to get what he felt was the fair value of Yahoo’s shares.
In the year and a half he ran the show, Yang sternly rejected several takeover offers from Microsoft, including a $47.5 billion bid that amounted to $33 a share. The offer valued Yahoo’s share at a 62% premium at the time.
This led to a proxy battle instigated by board member Carl Icahn, who wanted to oust Yahoo’s board of directors and replace it with candidates of his choosing. Icahn – it should be noted – favored a Yahoo partnership with Microsoft over Google.
Earlier this month, Google walked away from a plan announced in June to sell advertisements on Yahoo’s pages after the Justice Department threatened to block the deal on antitrust grounds.
Google already has more than 70% of the search-engine driven advertising market. Yahoo has about 10%, according to BusinessWeek.
For Yang, it was a chance to revive falling sales, as profit has dropped in 10 of the last 11 quarters.
And that’s caused the company to shed a lot of dead weight.
Last month, it announced 1,500 job cuts. And, Scott Moore, the senior vice president in charge of the company’s media group, recently announced he, too, is leaving.
In addition to Moore, Yahoo shed five top executives this past summer: Jeff Weiner (executive V.P. of the network division), Brad Garlinghouse (who oversees e-mail and instant messaging), Vish Makhijani (general manager of web search), Qi Lu (top engineer for search marketing) and Joshua Schachter (founder of social bookmarking site, delicious).
So Now What?
Instead of first saying that Yang is stepping down, Yahoo’s news release begins by announcing it has begun a search for a new CEO.
Yahoo Chairman Roy Bostock said the company is searching internally and externally for candidates, and is being aided by executive search firm Heidrick & Struggles.
“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,” Boystock said in the release.
Some of those candidates include Yahoo President Susan Decker. Other names floated include Jonathan Miller, the former chairman of AOL; Dan Rosensweig, once Yahoo’s operations chief; and Meg Whitman the former chief of Internet auctioneer EBay Inc., Bloomberg reported citing UBS analyst Ben Schachter.
Whoever gets the job is getting a difficult one with high expectations.
But one could argue that Yang’s follies lowered expectations. At this point, it’s understood that Yahoo can’t unseat Google as the world’s top search-engine advertiser – at least on its own.
Many board members and shareholders wanted Yang to sell Yahoo to Microsoft. If not that, then find another partnership to gain at least some traction against Google.
Before Yang’s departure, Yahoo’s shares dipped to $9.75, their lowest level since 2003. And on top of all of Yahoo’s problems, the global stock market is bracing for a cold year.
There’s a good chance that the role of Yahoo’s next CEO won’t be leading the company out of its mess, but instead wave the white flag in front of a company that can.
News and Related Story Links:
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BusinessWeek:
Google-Yahoo: Unintended Consequences
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Yahoo! Inc.:
Yahoo! Conducting Search for New CEO