San Francisco -- Scoffed for messing up the Microsoft acquisition offer and an abortive search deal with Google, Yahoo! Inc.’s co-founder and Chief Executive Officer Jerry Yang, under fierce financial pressure, is stepping down as CEO after 16 tumultuous months at the helm of the struggling online giant as soon as the board finds a replacement, sending shares up 4 percent on hopes the departure would clear the way for a deal with Microsoft, the company said Monday.
Yahoo said Yang, who co-founded the popular Web portal in 1995 at the age of 26 with Stanford University classmate David Filo, would step down as soon as the board of directors finds a new chief executive.
“Yang and the Board have had an ongoing discussion about succession timing, and we all agree that now is the appropriate time to make the transition to a new CEO who can take the company to the next level,” Yahoo chairman Roy Bostock said.
In a memo to staff today, Yang said he will leave the top job and return to being “Chief Yahoo,” the role he previously held before replacing former studio boss Terry Semel as CEO in the summer of 2007, as soon as the board of directors identifies a replacement.
“We are deeply grateful to Jerry for his many contributions as CEO over the past 18 months, and we are pleased that he plans to stay actively involved at Yahoo as a key executive and member of the Board,” Bostock added in a statement.
“Last June, when the Board asked me to assume the role of CEO and lead the transformation and reposition the company as a whole in order to more effectively meet the fast-changing needs of both users and partners, I did so because it was important to re-envision the business for a different era to drive more effective growth,” he said.
“Yang, 40, said the time is now appropriate to turn the Sunnyvale, California, company, whose share price has sharply declined during the past year, over to a new leader.”
Since reporting a 64 percent decline in net income and warning that the advertising market is softening, Yahoo announced a layoff of at least 1,430 by the end of 2008 in October. The cut follows another in which about 1,000 Yahoo employees lost their jobs in February.
Yang has been under tremendous 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.
Yang -- who will re-assume his former role as Chief Yahoo, focusing on strategy and technology -- struggled to carve an independent strategy for Yahoo and was held responsible when Microsoft Corp. walked away from an offer to buy Yahoo earlier this year.
Another trouble arose when rival Google Inc. abandoned a search advertising partnership amid regulatory concerns, and Yang faced a growing chorus of criticism from investors and analysts as Yahoo’s shares nosedived.
“From founding this company to guiding its growth into a trusted global brand that is indispensable to millions of people, I have always sought to do what is best for our franchise,” Yang said in a statement.
“I will continue to focus on global strategy and to do everything I can to help Yahoo realize its full potential and enhance its leading culture of technology and product excellence and innovation,” Yang added.
“The company is in desperate need of change and this is clearly one way to do it,” said Ross Sandler, an analyst at RBC Capital Markets, adding that Microsoft could enter the picture again. “Jerry was the roadblock for the last deal getting done,” he said.
Yang has consistently said that he would sell the company for the right price.
“I think it is the right move for the company,” said Eric Jackson, an activist Yahoo shareholder who has pressured the company for big changes. However, he added, “It is really too little too late. This is a board failure more than it is Jerry’s failure. These problems have been around at Yahoo for well over two years now.”
Microsoft withdrew its $47.5 billion buyout offer in May after Yahoo rejected the sweetened bid.
Yang’s departure may be a harbinger to new talks with Microsoft, which bid $47.5 billion for Yahoo this year. Though it is unclear to what extent Yang’s departure could rekindle Microsoft’s interest in making another run at the company. Yahoo Chairman Roy Bostock also opposed the deal, but new board member and billionaire investor Carl Icahn favored a deal with Microsoft.
“At a minimum, it signals that the board wants to reopen negotiations with Microsoft,” said Jeffrey Lindsay, an analyst at Sanford C. Bernstein in New York. “The board is frustrated with deteriorating performance and wants to move ahead.”
Microsoft spokesman Bill Cox declined to comment.
Yahoo, based in Sunnyvale, California, rose 47 cents, or 4.4 percent, to $11.10 in extended trading after closing at $10.63 on the Nasdaq Stock Market.