Yang Exit May Mean Asset Sales

Jerry Yang's exit from Yahoo! Inc. removes one of the last vestiges of a management team chided by investors for failing to find a buyer or negotiate a sale of stakes in Asian assets worth more than $10 billion.

Now that co-founder and one-time chief executive officer Yang has cut his leadership ties to Yahoo, newly appointed CEO Scott Thompson has freer rein to unwind the company's part-ownership of Alibaba Group Holding Ltd. and Yahoo Japan Corp. He may also do a better job mounting a credible threat to Google Inc. and Facebook Inc. in online advertising, said Clayton Moran, an analyst at Benchmark Co.

"He's been perceived to be an impediment to change," Moran said of Yang. "The founder has left, so even though Thompson is new, he is more in control today than yesterday," said Moran, who is based in Del Ray Beach, Florida, and has a "hold" rating on Yahoo.

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Yahoo, the most popular U.S. Web portal, said yesterday that Yang, 43, is stepping down from the board of directors and its management. Yang also left the boards of Yahoo Japan and Alibaba Group, Yahoo said in a statement.

After co-founding Yahoo with David Filo in 1995 when they were doctoral students at Stanford University, Yang helped create the world's most popular website, with a market capitalization greater than $100 billion. Yahoo lost its luster in recent years as Google snared a larger share of the search advertising market and Facebook captured the attention of people who sought a more social experience on the Web.

Yang's exit follows the ouster of CEO Carol Bartz in September 2011. She was replaced by Thompson, former president of EBay Inc.'s PayPal unit.

Bartz clashed with Alibaba Group Chief Executive Officer Jack Ma, while Yang was unsuccessful in clinching a sale of the stakes in the Asian companies. The changes could make it easier to close a transaction, said Allen Weiner, an analyst at Gartner Inc. in Austin, Texas.

"By clearing out some artifacts of the past, it's symbolic of the company's desire to move forward," he said. "With Jerry out of the way, it will perhaps make negotiations with the folks at Alibaba easier."

Alibaba Group CEO Jack Ma said he has "great respect" for what Yang has built at Yahoo.

'Chief Yahoo'

"Jerry is a longtime friend with whom I have had a strong personal and professional relationship that has withstood some ups and downs over the past few years," Ma said in statement. "We look forward to continuing our constructive relationship with the Yahoo board and leadership."

Yang, who had the position of "chief Yahoo," was CEO from June 2007 to January 2009. After the Sunnyvale, California-based company rejected an acquisition offer from Microsoft for $47.5 billion, Yang was replaced by Bartz as CEO.

Yahoo investor Third Point LLC late last year demanded two board seats and asked for Yang to step down as a director. Third Point CEO Daniel Loeb cited the "board's inability — or perhaps unwillingness — to properly solicit true strategic alternative bids, let alone to negotiate them," in a November statement. Third Point already had called for Chairman Roy Bostock to step down last year.

Four other directors will also depart from Yahoo's board, the technology blog AllThingsDigital reported yesterday, citing people close to the situation.

Yahoo shares fell less than 1 percent to $15.43 at the close in New York yesterday. They jumped as high as $16.48 after the announcement. In German trading today, the stock gained 2.7 percent to the equivalent of $15.97 at 8:49 a.m. in Frankfurt.

Born in Taiwan and raised in San Jose, about 10 miles south of Yahoo's headquarters, Yang and Filo took Yahoo public with CEO Timothy Koogle in 1996.

As traffic on the Web soared, so did ad revenue, helping Yahoo's stock value surge. Then the market collapsed during the dot-com bust. After peaking in January 2000, Yahoo shares plummeted 97 percent before bottoming out in September 2001. Today, the company is valued at about $19.1 billion.

Yahoo had already been through management and identity shifts before Bartz's reign. Terry Semel, a Warner Bros. movie executive who knew Yang from an Allen & Co. media conference in Sun Valley, Idaho, replaced Koogle as CEO in 2001 and stepped up efforts to make the company a media hub. While Semel presided over five years of more than 20 percent sales growth, the company lost its lead in Internet ads to Google.

Microsoft's Offer

When Yang became CEO in June 2007, he vowed to renew the struggle against Google's growing dominance.

"I'm ready to dig in and make sure we can take Yahoo to the next level," Yang said at the time.

In 2008, after Yang failed to jump-start sales growth, Microsoft stepped forward to acquire Yahoo — an offer that Yang spurned. Yang tried to assuage investors through a partnership with Google, though the effort was scuttled amid regulatory scrutiny. The company later forged an agreement that handed Internet-search technology to Microsoft, the world's largest software maker.

Yang's handling of the Microsoft negotiations rankled investors, including billionaire Carl Icahn, who successfully lobbied to add new board members in 2008. Icahn, who is no longer on the board, sold the last of his stake in 2010.

"My time at Yahoo, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life," Yang said in a letter to Bostock included in yesterday's statement. "However, the time has come for me to pursue other interests outside of Yahoo." Yang didn't respond to a request for an interview.

Yang still owns 46.6 million shares, or 3.8 percent of the company's outstanding stock, according to a Nov. 25 filing.

"We appreciate Jerry's comments and share his enthusiasm for the company's prospects," said Bostock. "With Scott Thompson leading an outstanding team of Yahoos to deliver innovative products and an engaging customer experience, Yahoo's future is bright."

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