Yahoo CEO pays price for snubbing Microsoft

After driving off a takeover buyout offer from Microsoft, and losing out on a deal with Google, Jerry Yang is stepping down as chief executive of Yahoo, the company he co-founded.


After driving off a takeover buyout offer from Microsoft, and losing out on a deal with Google, Jerry Yang is stepping down as chief executive of Yahoo, the company he co-founded.

Yang, who became CEO in June 2007, will take on his former title of "Chief Yahoo" once a successor is found, and also remain on the board.

He has been under intense pressure from shareholders in recent weeks for a string of perceived missteps that began in February with Microsoft's $45 billion offer to buy Yahoo. Microsoft was offering $33 per share for its Internet rival but Yang rejected that price as too low. Yahoo shares are now around $11 each.

Eventually Microsoft withdrew its offer and Yang went on to talk with News Corp. about a venture with MySpace and with TimeWarner about a merger with AOL, but the talks came to nothing. In June he struck an advertising deal with Google but that too fell apart in the face of opposition from the US Department of Justice.

Yang appears to recognis e this and at an Internet conference in San Francisco two weeks ago made a thinly veiled initiation to Microsoft to come back to the negotiating table.

"To this day I would say that the best thing for Microsoft to do is to buy Yahoo," he said. When quizzed on whether he would stick to a higher price that he demanded back in May he added, "Oh no. At the right price, whatever the price is."

But Microsoft CEO Steve Ballmer didn't bite and said a couple of days later, "We are not interested in going back and re-looking at an acquisition. I don't know why they would be either, frankly. They turned us down at $33 a share."

Yang was seen by many as the main impediment to a deal with Microsoft, but that doesn't mean a deal is now much more likely to happen, said analyst Charlene Li, founder of Altimeter Group. "The board was behind him and they're still there, and Yang is still there, so I don't think a Microsoft deal is imminent," she said.

The move to appoint a new CEO is not surprising, said Greg Sterling, an analyst with Sterling Market Intelligence. “There had been public speculation about this for several months and as they went through several quarterly earnings calls and the condition of the company wasn’t improving, I think there was some sense that you needed new leadership,” he said.

While Sterling credits Yang with some good ideas for turning around the company, “there’s a way in which maybe his personality isn’t well suited for what the company needs, which is maybe a more forceful leader who can restore confidence,” he said.

While the drawn-out attempt by Microsoft to buy Yahoo probably led in part to Yang stepping aside, subsequent factors also likely played a role. “I think it’s not so much a Microsoft thing as it is the demise of the Google deal and a failure to find another alterative to the merger,” Sterling said.

It’s hard to say if a new leader at Yahoo will reignite a deal with Microsoft, Sterling said. The cynic's view is that installing a new leader “saves face for everyone” and let’s someone new come in to make a deal with Microsoft, Sterling said.

Li praised Yang as being very smart and a "tremendous asset" for Yahoo, especially for the strategy he has helped put in place since Terry Semel's departure last year. Yahoo is opening its various services for developers to build new services on top of, as a way to drive more traffic.

But Yang hasn't been so good at communicating the strategy and energis ing Yahoo's partners, advertisers and end users, Li said.

"He could probably get there eventually, but it takes a different type of skill to get that buzz back and get people excited about Yahoo again," she said.

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