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Yahoo Bloodletting Runs Deep as Cofounder Yang Exits

By Richard Adhikari
Jan 18, 2012 11:39 AM PT

Yahoo cofounder and former CEO Jerry Yang has left the company in the wake of pressure from shareholders and the appointment of a new CEO earlier this month.

Yahoo Bloodletting Runs Deep as Cofounder Yang Exits

Yang announced his departure from all positions at Yahoo on Tuesday.

Following the announcement, speculation grew that a general housecleaning at the top is pending.

"It's not unusual to see significant management shake-ups when a new CEO takes the helm, as he brings in the team that complements his or her leadership style and vision for the company," John Challenger, CEO at Challenger, Gray & Christmas, told the E-Commerce Times.

Yang "clearly was pushed [out], but with his level of ownership, he could have resisted much more strongly," remarked Rob Enderle, principal analyst at the Enderle Group. "I think he realized that he'd become part of the problem that needed fixing."

Yahoo did not respond to requests for comment for this story.

What Jerry Did

In addition to resigning from Yahoo's board of directors, Yang also stepped down from the boards of Yahoo Japan and Alibaba Group Holding.

This could clear the way for Yahoo to sell off its holdings in Asia and boost its revenue.

Yahoo "will need cash to buy time, and the formula for doing a turnaround successfully has within it the step of cutting the company back to a seed you can regrow it from," Enderle told the E-Commerce Times.

However, raising cash "is likely to have little impact if the remaining company leaders don't have a plan," Challenger pointed out. "Finding ways to get cash is one thing, but without a plan on how to spend it, it will most likely be squandered."

Why Yang Might Have Been Ousted

Although Yang's founding of Yahoo made him a respected figure in the Internet industry, critics often faulted his management style and what they saw as a lack of vision.

He turned down multiple approaches from Microsoft to purchase Yahoo, the second time in 2008 for about US$44 billion. Reaction to Yang's decision, combined with increasing competition from Google and Microsoft's Bing as well as that year's global financial crisis, sent Yahoo's share prices tumbling. It's currently valued at about US$15.90 per share.

Recently, Yang began seeking a minority investment in Yahoo from private equity firms. This reportedly angered several shareholders, including hedge fund Third Point, which holds 5.2 percent of Yahoo's shares.

Third Point wrote to Yahoo's board criticizing those plans and citing a history of strategic bungling by Yang and Yahoo chairman Roy Bostock.

Further, Yang "was rumored to have been one of the bigger thorns in [former CEO Carol] Bartz's side," Enderle said. "In the end, he wasn't good at leading and was unwilling to stay in a non-leadership role, so he had to go."

Parting Is Such Sweet Sorrow

Yahoo's board of directors has nine other members, all of whom are up for reelection this year.

Four of them might step down soon, AllThingsD has reported: Bostock, Vyomesh Joshi, Gary Wilson and Arthur Kern.

That could lead to a largely revamped board of directors, which might be a good thing.

"New blood is never a bad idea, if they bring new ideas to the table," Challenger said. "And Yahoo is a company in need of fresh ideas and fresh thinking."

Can Yahooligans Ride Again?

Yahoo has undergone several changes of leadership over the past few years as it fumbles after success.

Yang stepped down as CEO in 2009 in the face of mounting investor pressure following his refusal of Microsoft's bid. Carol Bartz was then tapped for the CEO post, but she was fired over the phone after about 30 months. She was temporarily replaced by Yahoo CFO Timothy Morse, who was replaced by current CEO Scott Thompson earlier this month. Thompson was formerly PayPal's president.

Whether or not the latest changes will be productive remains to be seen.

The house cleaning "tells us [Thompson] appears to know the basics of what he needs to accomplish either a sale or turnaround, and is executing against that knowledge," Enderle added. "You need to establish clear and focused leadership up front and he appears to have done just that."

However, "Yahoo appears unable to decide what it wants to be and how to differentiate itself and, therefore, compete with the likes of Google and Facebook," Challenger said. "Until someone over there figures that out, the company is going to struggle to find the leadership that will lead it in the right direction."


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