Former Yahoo CEO Jerry Yang in happier days at the Las Vegas Consumer Electronics Show in 2008. Mr. Yang announced Jan. 17, 2012, that he is leaving Yahoo. The surprise departure comes just two weeks after Yahoo Inc. hired former PayPal executive Scott Thomson as its CEO.
The exclamation mark that online giant Yahoo Inc. likes to tack onto the end of its moniker is appearing somewhat forced as of late. As shareholders await the company's fourth-quarter earnings report on Tuesday, it's question marks that fill the air.
Yahoo has failed to adapt to the increasingly fragmented market it once dominated. While the Internet portal still boasts a large audience – attracting up to 600 million visitors per month – its shares have hardly moved since August, 2009. None of the company's premium online media properties has been able to keep up with rivals such as Google and Facebook, which have eaten its lunch in the markets for online display advertising and search, respectively.
The Sunnyvale, Calif.-based company has endured lots of media coverage over the past two years, little of it positive. Amid sliding profits and market share, the board fumbled the dismissal of CEO Carol Bartz last September, giving her the bad news over the phone. Then hedge fund investor Daniel Loeb launched a crusade against Yahoo co-founder Jerry Yang, whom Mr. Loeb alleged was plotting a back-room takeover of the company.
Earlier this month Yahoo named its former chief technology officer, Scott Thompson, as its CEO. But while Mr. Thompson – who enjoyed success as head of PayPal after stints at Inovant and Barclays Global Investors – is undoubtedly a talented CEO, he lacks experience in search and online advertising, Yahoo's core businesses. Nor is he considered skilled in rescuing foundering companies, a talent Yahoo sorely needs.
"Scott is not a media guy," says Jefferies Group analyst Youssef Squali. "His background does not indicate a deep involvement selling online media on any scale, which while not rocket science, is very different from running an online payment processor."
While Mr. Thompson settles in, Mr. Yang is on his way out. He resigned abruptly last week. Yahoo shares shot up 3 per cent on the news, a sign of how eager investors are for change.
Many shareholders blame Mr. Yang for spurning a $44.6-billion (U.S.) takeover bid from Microsoft in 2008. The bid represented a 62 per cent premium to the company's share price at the time. In the years since, investors have gritted their teeth and watched the company's value sink to around $19-billion.
Analysts are hailing Mr. Yang's departure as a golden opportunity for the company's board to make up for years of poor decision making. According to Needham & Company analyst Laura Martin, the path is now clear for the sale of the company's stakes in Yahoo Japan and Chinese-based Alibaba Group, moves that Mr. Yang had consistently blocked.
But Yahoo shareholders aren't in the clear just yet. More upheaval is expected on Feb. 24, when all nine directors come up for re-election. There are rumours that a search is on for new candidates to replace several directors, including chairman Roy Bostock.
Analysts believe Mr. Thompson should sell Yahoo's Asian assets and focus on helping the company become more competitive in its core business. Failing that, a search for a suitor may well be in the cards. Either way, shareholders would do well to brace themselves for another dose of bad news on Tuesday, and hope that 2012 is more deserving of an exclamation mark.