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Yahoo facing brain drain as execs exit

Times Staff Writer

Yahoo Inc. executives are headed for the door as the struggling Internet pioneer prepares for a major reorganization while fending off a contentious proxy fight that could cost co-founder Jerry Yang his job as chief executive.

The brain drain accelerated as a potential buyout by Microsoft Corp. faded and resignation settled in that the Sunnyvale, Calif., company’s fortunes would be tied to new ad partner Google Inc.

After recent high-level departures, executives Qi Lu and Vish Makhijani are also leaving, three people familiar with the situation said Thursday.

A third executive, Brad Garlinghouse, is considering alternatives, including posts with venture capital and private equity firms, the people said. As senior vice president for communications and communities, he is responsible for Yahoo Mail and other key products.

A Yahoo spokeswoman declined to comment. The company released a statement saying it had a “deep and talented management team across all areas of the company.”

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Executives are leaving now that the Microsoft deal is history along with any hope of a stock surge or buyout package.

The exodus has triggered yet another reorganization of Yahoo, this time putting all product groups under one umbrella. Hillary Schneider, executive vice president for global partner solutions, will have a major role in a reorganized Yahoo, details of which could be announced as early as next week, the people familiar with the situation said.

Yahoo shares fell 18 cents Thursday to $22.73.

Lu’s departure had been expected. As executive vice president of the search and advertising technology group, he oversaw engineering efforts for the company’s search engine and search advertising technology. He is moving to China, the people said.

They said Makhijani was leaving to head the Bay Area operations of Russia’s leading search engine, Yandex. He and Garlinghouse both reported to Executive Vice President Jeff Weiner, who recently announced his departure. Weiner, who headed the network division, will split his time between two Silicon Valley venture capital firms.

Garlinghouse is well known in Internet business circles for his 2006 memo, the Peanut Butter Manifesto, which sounded the alarm about Yahoo’s sluggish performance.

The pending departures were first reported by blogs TechCrunch and Boomtown.

Yahoo President Susan Decker has groomed Schneider, who joined in 2006, to move up the ranks. Weiner’s departure provided the impetus to move ahead with the management overhaul, a plan Decker is pushing. That could lead to more departures as some find themselves with less responsibility, according to one person who, like the others, spoke on condition of anonymity.

Yahoo is under rising pressure to prove that it’s worth more than the $47.5 billion Microsoft had offered to buy it. Yahoo most recently turned down a proposal from Microsoft to buy its search business.

Investor Mithras Capital, which holds 1.7 million Yahoo shares, on Thursday called on Microsoft to take that proposal directly to shareholders.

Yahoo is betting on a new system to buy display advertising and the search partnership with Google to buy time with investors and stave off corporate activist Carl Icahn.

Yahoo announced the Google deal the same day that it said it had pulled out of talks with Microsoft. Yahoo and Google are delaying the start of their partnership by as much as 3 1/2 months so they can answer questions from antitrust regulators concerned about a tie-up between the world’s two biggest search engines.

Icahn has mounted a campaign to replace Yahoo’s directors in an Aug. 1 shareholder election. If he gains control of the nine-member board, he has pledged to remove Yang as CEO. Yang has insisted Yahoo is more valuable to investors as a stand-alone company.

Talk of an overhaul is causing turmoil among Yahoo employees. Some former Yahoo executives are comparing the predicament to the “AOL death spiral,” referring to the decline of the once-powerful Internet brand.

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jessica.guynn@latimes.com


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