Updated 10:00 a.m.
Jerry Yang isn’t formally stepping down as Yahoo’s chief executive until a successor is found, but Wall Street is already throwing him a going-away party — to the tune of $2.3 billion.
That’s how much Yahoo’s market value increased in pre-market trading Tuesday morning, as investors reacted to the previous night’s news that Mr. Yang, a founder of the Web company, would give up the post he took a year and a half ago. During that time, he resisted a takeover bid from Microsoft — for much more than Yahoo’s current share price — and helped arrange a partnership with Google that later collapsed.
Yahoo’s stock rose as much as $1.68 to $12.31 before the markets opened.
(The stock began trading at $11.94, up $1.31 from the previous day’s close.)
While there are currently no talks going on between Microsoft and Yahoo, Mr. Yang’s move toward the exit gave new life Tuesday to speculation that a deal could be revived.
In a research note, analysts at Bernstein Research led by Jeffrey Lindsay said Mr. Yang’s decision to leave — which the company said was a “mutual” one — was “a signal they are prepared to examine more deal options, in particular with Microsoft.”
It was a refrain repeated all over Wall Street: “We still believe Microsoft will eventually own Yahoo,” Benjamin Schachter, an analyst at UBS, wrote late Monday. “Jerry moving out of the C.E.O. role may accelerate this.”
But a deal with Microsoft isn’t Yahoo’s only option, and some industry watchers still see a chance for a merger between Yahoo and AOL, which is owned by Time Warner.
Mark May, an analyst at Needham & Company, put the odds of a Yahoo-AOL deal at 20 percent in a research report late Monday, paidContent.org reported.
Of course, despite all the renewed deal chatter, Yahoo could still go it alone. Mr. May put the odds of this happening at 35 percent, making it, in his view, the likeliest scenario of all.
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2008
9:32 am
There’d be a even bigger party when Jeff Immelt departs GE.
— Posted by MARK KLEIN, M.D.
2008
10:02 am
When I suggested last spring/summer that Yahoo !? shares were headed to a level below $14/share, most readers thought I was correct on the direction downward but on absolute share price spiteful of company management and its continuing failure to face the fundadamental reality of a lack of not only strategy but of a “real and surviving” business.
So now the company has a market capitalization of around $15-17 billion and has recently traded below $10/share. The $3-4/share that I never accounted for might be considered simply the result of terrible markets of the past two months and also of the “Yang Effect”.
The removal of this “throwback-to-the-early-90’s” executive might now benefit in some small respect the shareholders. But with deterioration not only over the past 6-12 months in the business but over the past several years it is dubious as to whether Google can find another case of turbo-charged Ripple or Night Train (wine) to consume in preparation for consideration of a bid. And a deal involving AOL rolls two complete and utterly clueless weaklings into the same coffin. No good news there.
So what does Yahoo!? become on its own? My suggestion is something worth $3-4/share… essentially an expensive option on future existance and possible low-level success. It becomes (as does AOL) an inexpensive point of entry for some children and the elderly to experience the Internet, although with the proliferation of good bandwidth and some interesting content providers into all market segments, it is dubious as to whether “simple and stupid” as in Yahoo and AOL will have a place anywhere, especially if the moronic advertising model is finally called out on the carpet for what it is: a desperate, trashy, last-ditch survival technique for the soon to be non-existant. Over to you Jerry.
— Posted by Hank
2008
10:40 am
When Tom Siebel finally left Siebel, it took the new CEO Shaheen about 6 months to imbrace Tom’s arch enemy Oracle (and Tom’s ex-boss Larry who poo pooed Tom’s CRM idea back in the day) and consummate a deal. You can be sure the next CEO of Yahoo! is going to spend alot of time negotiating what he gets paid when Yahoo! is bought, because it will be bought quickly.
Shareholders are winning out here and I’m impressed. Usually the board is in the CEO’s back pocket and these type of founder/CEO roles never depart easily or cheaply. If only credit were easier - Y! shareholders could hope for a Private Equity Group white knight to swoop in and save them at 10-12x LTM EBITDA (currently trading at 8.96x). Sadly they are now clinging on hoping for a share swap with someone bigger and better. Outside chance that a conglomerate advertising firm like WPP or Omnimedia steps up with a premium offer to own this media-delivery channel. But I’m betting MSFT quietly gets this done in 6 months at about the same price it’s trading at now. And that prospect is the only thing attracting a good CEO to this job right now.
— Posted by AKJ
2008
11:01 am
Jerry Yang will go down in history as one of the worst CEO’s in Silicon Valley history. His arrogance and his ego prevented a nearly $50b sale. He spent $72m on advisors dreaming up ways to prevent his shareholders from cashing out. He then talked, and talked and talked, and talked to AOL, he then watched Alibabi lose a few billion of market cap, he then went on to do an ill-advised Google deal that no one, other then him, ever thought would come to fruition. After all of that, he said he “accomplished most, if not all, of what he set out to do” If there is less effective CEO out there not in prison I don’t know who it is.
— Posted by MHK
2008
11:24 am
Arrogance, egoism, hubris are nothing compared to Icahn on your Board and a legacy that will clearly show that you cost your shareholders quite a lot of money…………this is MSFT’s Christmas gift.
— Posted by Charles
2008
11:37 am
Everyone criticizing Yang is only thinking about money. Software Engineering is at a sad state whereby you are labelled the village idiot if your idea does not boil down to money. Yang found Yahoo with a dream; a vision. A part of it if to have Yahoo become like IBM.. Live on through numerous centuries independently and with openness. Is it wrong for a man to dream and work towards a dream? Think about that next time you clap over Yangs ousting as CEO.
— Posted by Green Williams
2008
11:52 am
Maybe Jerry Yang will not be remembered so well for his last days at the helm, but you really have to look past the stock market. Yahoo! was not a company originally founded to make investors rich while they sit in their lazy boys. Yahoo! was an essential part of what created the Web as we know it. Enough to make Microsoft very hungry for it.
— Posted by Michael Kay
2008
11:59 am
I hope Yahoo will go alone and withstand pressure from Wall Street, especially not being merged by Microsoft. Microsoft’s corporate culture and way of doing business is not in line with Yahoo. And personally, I distaste Microsoft. I am offended by the fact that everytime I turn on my computer the symbol of that company has to force into my view. I love diversity and rennovation and not believe any form of monopoly.
Yahoo is a legitimate business. Yes, it made mistake by hiring an Hollywood non-tech out-of-dated guy to run its company, which allowed Google to evolve into a dominating figure on the web.
Considering the Internet is still in its infancy. Yahoo still has a great future and a chance to regain its glory.
Lets wait and see.
The worst scenaior for me is to merge with Microsoft–a take-no-prisnor type of business.
— Posted by maymac
2008
12:05 pm
New tech ideas start by providing benefits that help consumers. Then the rapid growth of the providers seem to become twisted by greed, and benefits to those same consumers decline in value. Yahoo is a representative case, it’s consumers are the classic pawns, and Jerry Yang, is the classic CEO.
— Posted by Frank Barry
2008
12:09 pm
Jerry Yang will go down in history as one of the worst CEO’s in Silicon Valley history. His arrogance and his ego prevented a nearly $50b sale. He spent $72m on advisors dreaming up ways to prevent his shareholders from cashing out. He then talked, and talked and talked, and talked to AOL, he then watched Alibabi lose a few billion of market cap, he then went on to do an ill-advised Google deal that no one, other then him, ever thought would come to fruition. After all of that, he said he “accomplished most, if not all, of what he set out to do” If there is less effective CEO out there not in prison I don’t know who it is.
— Posted by MHK
— Posted by DFC
2008
12:16 pm
This is not good news for shareholders. How many billions of dollars of market cap did Yahoo lose between spurning MSFT and today? That’s the market value of Jerry’s ego, which wouldn’t allow his baby to be sold to the Death Star. Sorry, YHOO holders.
— Posted by Joneg
2008
12:19 pm
@4 - in answer to the rhetorical at the end of the paragraph - Two words: Rick Waggoner
— Posted by chris from Saint Paul
2008
12:32 pm
As a CEO of any size company evaluating any size deal, one is not allowed the luxury of letting emotions get in the way. I suspect that Jerry could not bear to see his baby get swallowed by the behemoth which first tried but failed to compete with it. There are users all over the world who despise MS and its products for a laundry list of reasons. They choose to buy or create alternates such as Linux. But they’re not responsible to their share holders by the billions. Seeking out google after staving off MS was childish, but also an acknowledgement of yahoo’s search engine inferiority.
— Posted by levent gulari
2008
12:34 pm
Jerry Yang will go down in history, NOT as one of the worst CEO’s in Silicon Valley, but as a rare example of a man who stuck with his core values, made an extravagant fortune, and emerged with is soul intact. In the wake of his departure, Yahoo! will slowly become the Jefferson Airplane of tech-icons, as it is co-opted, and slowly dismantled, reconfigured and vitiated to the point where it returns to its original essence–a word with no real meaning. Many a quick buck will be generated in this process, and hooray for that. But Yang will endure as one of the titans of his era–not some lounge act riding the coat tails of a genuine original.
— Posted by unclesmedley
2008
12:38 pm
Dr. Klein is correct about Mr. Immelt. Jeff was Jack’s biggest mistake, although it might have been worse if Nardelli had become CEO.
— Posted by dave
2008
12:39 pm
I want 2.3 billion dollars lol
— Posted by Rich
2008
12:49 pm
Yang is truly a Yahoo, not a CEO.
— Posted by R.
2008
1:12 pm
I have been a yahoo community user for over 10 years. The email, music, videos and horoscopes apps have been solid for years. Yahoo has been some thing I have come to count as a user. If yahoo merges with Microsoft; my biggest fear is all apps will be subject to the same MS failure pattern, every has become so eager to accept. I for one would become an gmail user the next day. To date I have not lost any data from the yahoo email service. Some thing I’m not sure I could count on with MS engs. running around the place.
— Posted by Jeff
2008
2:15 pm
Most of the commenters seem to think that Jerry Yang was some kind of moron for turning down Microsoft, as if all of Yahoo’s problems stem from that. This opinions seem to come from the perspective of stockholders with no understanding of the two companies beyond their share value.
The deal with Microsoft was a horrible idea for both Yahoo and Microsoft. The deal would end with Microsoft scrapping all of Yahoo’s technology, which is based on Freebsd and thus subject to NIH from the windows developer, and all of the good people quitting. After all, if the people at Yahoo wanted to work for Microsoft, they would have gotten jobs there in the first place.
Actually, at this point, with the ship obviously going down, I’d imagine that most of the smart guys at Yahoo have made arrangements for work elsewhere.
So, Microsoft woudl get nothing from it’s investment. None of the high end and hard sought after employees and no technology. They will spend rediculous amounts of money buying the company, and then years spending *more* money “integrating the technology” i.e. porting everything over to windows. Meanwhile Google is putting all their cash into R&D and getting even further ahead of Yahoo and MSDN then they arleady are.
On Yahoo’s side, if Jerry had agreed to the deal, the company would have been immediately gutted and destroyed by Microsoft. Yahoo would be a brand and nothing more.
On the other hand, the shareholder’s would have made out like bandits, but who cares? If you spend your life building a company the last person you feel beholden to are some random suits who purchased publicly traded shares of your company on NASDAQ, and are likely to sell it again just as soon as they convince you to do something stupid with your company.
— Posted by Brendan
2008
3:05 pm
Couldn’t agree more with Jeff and Brendan. Yahoo is great at what it does, could recover price over time, and all things considered, Google is way over priced and over rated.
— Posted by Pete
2008
8:06 pm
Just because Yahoo was a great idea 15 years ago, does not mean that it has great potential now. It is a company whose time has come and gone. It missed the boat on search and it seems to be missing the boat on streaming video media.
2008 was the year Yahoo’s investors got Yanghoo’d
— Posted by williambanzai7
2008
10:42 am
Didn’t Jerry lose the right to run the company based on preserving its “essence” and the cool “go it alone” factor the day he took it public? Shareholders bought shares to make money, not to make sure a cool company stayed independent no matter what. They have been dumping Y! shares because their main source of revenue (advertising) is losing ground quickly to Google and Yahoo has shown no viable strategy to stop that trend. If his goal is to run the company according to Jerry’s idea of what a good company is, I invite him to interview several Private Equity Groups to find one to sponsor him to take Y! private and then he can have at it. Until then, it’s the shareholders’ company and he’s supposed to be running it for their benefit.
Keep in mind - Jerry was hamhandedly trying to negotiate a better price out of MSFT and failed, then tried to “entice” them back to buying at a lower price later and failed. He clearly is okay with the idea of selling to them at a price, he’s just not good at obtaining that price. Hopefully the next CEO will do better.
— Posted by AKJ
2008
3:06 pm
Brendan:
The CEO of any corporation has a fiduciary and legal responsiblity to their shareholders, and it is unethical and illegal for them to put anything ahead of that responsiblity (including their own ego or some notion of what you think makes a company great). If an entrepreneur decides to take his public company to create liquidity for his ownership, then he must answer to any “random suit” who invests in his company. That is the deal he signs up for.
You may be right that Microsoft was overpaying for Yahoo, and that Microsoft would’ve destroyed the company as we know it, but that is Microsoft’s problem. Yang must keep only his shareholders in mind, and in this case, his ego cost them billions of dollars. (Next stop, shareholder lawsuits..!)
Yang may have been a visionary and an incredible entrepreneur, but he was also a terrible CEO.
— Posted by Rob W. D.