Yang to end rocky reign at Yahoo
Unable to rescue the Internet giant he co-founded from its worst decline since the dot-com bust, Yahoo Inc. Chief Executive Jerry Yang said Monday that he planned to step down as soon as he could find a successor.
Yang took over for Terry Semel, a former Hollywood executive, in June 2007 with promises to revive the company’s fortunes. Instead, he is returning to a figurehead executive position after a stormy tenure in which he let two would-be partners slip away -- bungling takeover talks with Microsoft Corp. and failing to land an advertising partnership with Google Inc.
“This whole storybook ending of the founder coming back as CEO hasn’t panned out too well,” Motley Fool analyst Rick Munarriz said. “Yahoo finally realizes that there is a problem at the company, and it starts at the top.”
Yang will return to his former post as “Chief Yahoo.” He also will remain on the board, where he will play a key role in the search for his replacement, the company said late Monday.
Yang had been considering stepping down for the last few months, people familiar with the situation said. They said Monday’s decision was a joint one he reached with the board of directors.
It’s been a painful slide for Yang, whose appointment as CEO had fueled hope among the Sunnyvale, Calif., company’s employees and shareholders that he could reenergize Yahoo despite his lack of operational experience. Yang started Yahoo, then a directory of websites, with fellow Stanford University graduate student David Filo and incorporated it in 1995.
Yahoo had for years been outmaneuvered by Google and more nimble Internet rivals, despite its strengths as one of the Web’s most visited sites and as one of the largest sellers of online display ads.
But Yang, a respected and well-liked engineer with a solid vision of where the Internet is headed, was too slow to carry out his new strategies and to make tough calls, analysts say. His undoing with investors was the widely held perception that he thwarted the Microsoft takeover.
Yahoo’s stock has lost about 60% of its worth on Yang’s watch, erasing more than $20 billion of market value. Its shares fell 1.8% to $10.63 on Monday.
Yahoo has hired executive search firm Heidrick & Struggles to evaluate candidates from inside and outside the company.
The CEO will have to run a company battered by low morale, impatient investors, a worsening advertising market and a divided board of directors, with activist shareholder Carl Icahn pushing for a Microsoft deal or other major move.
CEO candidates are believed to include former AOL CEO Jonathan Miller, News Corp. President Peter Chernin and Yahoo President Sue Decker, although she is considered a long shot because of her close association with Yang.
“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,” Yahoo Chairman Roy Bostock said.
As someone deeply in tune with the company and its customers, Yang had said publicly that he planned to stay on as CEO as Yahoo attempted a turnaround in a treacherous economy. But he drew the ire of investors, who withheld a third of their votes for his reelection to the board in August.
The most contentious decision: Yahoo’s rejection of Microsoft’s unsolicited offer of $31 a share in cash and stock, which represented a 62% premium.
As an alternative to Microsoft, Yahoo struck another deal: a search-advertising partnership with Google. Yahoo said using Google’s superior ad-delivery technology would boost its revenue and profit.
But that deal fell apart two weeks ago, when Google walked away as federal regulators prepared to challenge the deal on antitrust grounds.
An attempt to merge with Time Warner Inc.'s Internet unit AOL also never materialized.
Yang’s efforts to reverse slowing sales growth and sharp profit declines were undercut by the deepening economic crisis that prompted advertisers to cut spending. Yahoo is planning to cut 10% of its workforce early next month.
Yang’s resignation signals that Yahoo’s financial picture has deteriorated further, Sanford C. Bernstein analyst Jeffrey Lindsay said. “Clearly it’s a reaction to how the company is performing,” he said.
Investors had lobbied to have Yang replaced. Icahn, who tried to seize control of Yahoo but settled for three seats on an expanded board and a significant say in the company’s direction, was a vocal Yang critic during the proxy fight.
Icahn was not the only one who questioned whether Yang was the right leader.
Anthony Valencia, media analyst for TCW Group in Los Angeles, which owns Yahoo shares, said Yang could have boosted shareholder value by improving his company’s operations or selling to Microsoft. “On both fronts, he was unsuccessful.”
Investors and analysts are urging Yahoo to bring in a leader who can either revive talks with Microsoft or compete more effectively with Google.
(BEGIN TEXT OF INFOBOX)
Recent key events at Yahoo
June 18, 2007: Yahoo Inc., which has been losing ground to rival Google, replaces Chief Executive Terry Semel with company co-founder Jerry Yang.
Feb. 1, 2008: Microsoft Corp. makes an unsolicited $44.6-billion bid for Yahoo.
May 3: Microsoft withdraws its bid after the two companies fail to agree on how much Yahoo is worth.
May 15: Billionaire investor Carl Icahn launches a bid to oust Yahoo’s board of directors, including Yang, in an effort to reignite the Microsoft deal.
June 12: Yahoo announces an online advertising alliance with Google, saying the deal could boost annual revenue by $800 million.
July 12: Yahoo rejects a proposal from Microsoft and Icahn to break up Yahoo.
July 21: Yahoo agrees to give Icahn and his allies three board seats out of 11. Yang keeps his job.
Oct. 21: Yahoo announces it will lay off at least 10% of its workforce over the next few months.
Nov. 5: Google cancels its advertising deal with Yahoo after federal regulators object on antitrust grounds.
Nov. 17: Yang says he will step down as Yahoo CEO.
Times research by Scott J. Wilson