Yang’s Exit From Yahoo May Remove Barrier to Asia Asset Sale

Jerry Yang’s exit from Yahoo (YHOO)! 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 Yang has cut leadership ties to Yahoo (YHOO), newly appointed Chief Executive Officer Scott Thompson has freer rein to unwind the company’s part-ownership of Alibaba Group Holding Ltd. and Yahoo Japan Corp. Yahoo is still pursuing the sale of the holdings, while also talking with private-equity firms about selling a minority stake in itself, a person with knowledge of the matter said. An Asian deal is more likely and may be concluded in the coming weeks, the person said.

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.

“He’s been perceived to be an impediment to change,” said Clayton Moran, an analyst at Benchmark Co. in Del Ray Beach, Florida, who has a “hold” rating on Yahoo. “The founder has left, so even though Thompson is new, he is more in control today than yesterday.”

Taking On Google

Yang’s departure may also help Thompson mount a more credible threat to Google Inc. (GOOG) and Facebook Inc. in online advertising, Moran said.

Additional board departures are likely, two people with knowledge of the matter said. Four more directors will exit the board, the technology blog AllThingsDigital reported yesterday.

Dana Lengkeek, a spokeswoman for Yahoo, declined to comment.

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. (EBAY)’s PayPal unit.

Alibaba Clash

Bartz clashed with Alibaba Group CEO 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.

“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 (MSFT) for $47.5 billion, Yang was replaced by Bartz as CEO.

Board Criticized

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.

Yahoo shares rose 3.2 percent to $15.92 at the close in New York. The stock declined 3 percent last year.

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 $19.7 billion.

Media Efforts

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.

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.

Icahn’s Involvement

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.”

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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