In just 24 hours, Yahoo Inc. chief executive officer Jerry Yang lost about $230-million (U.S.) after the decline in his company's stock price.
However, Mr. Yang's personal wealth could prove to be the least of his worries.
Yesterday, Wall Street pummelled Yahoo's stock after Microsoft Corp. withdrew its $47.5-billion takeover offer on the weekend. Shares dropped 15 per cent, erasing $6-billion in market capitalization and cranking the temperature on Mr. Yang's seat from hot to scorching.
The question is, what comes next for the embattled Internet trailblazer? And how fast can Mr. Yang deliver?
Yahoo finds itself staring down a series of lawsuits from disgruntled investors, employees worried about their company's future and their own declining stock options. Then there is the possibility that activist shareholders could try to resurrect the Microsoft bid later, perhaps at a lower price.
Despite the selloff, Yahoo's shares remain 30 per cent higher than the day prior to Microsoft's bid.
Investors drove shares of Yahoo up more than 50 per cent after Microsoft's offer was first announced, but now Mr. Yang and his board must find a way to prove that turning down an offer of $33 a share for a stock many analysts value at about $25 was the right move.
Analysts say that if Mr. Yang has an ace up his sleeve, now is the time to play it.
"If he [Mr. Yang] has a deal in the works with either Google [Inc.] or [Time Warner's] AOL or both, then I think things will look very promising," said Jeffrey Lindsay, Internet analyst with Sanford C. Bernstein & Co. in New York. "If it's the case that they don't and they were bluffing, the shareholder reaction will be fairly negative."
Mr. Yang's post-Microsoft options are limited and his window of opportunity to show shareholders that the company is better off without help from the Redmond, Wash.-based company is closing fast. If he stands pat, investors might lose patience with the Yahoo turnaround plan, but if he rushes into a deal with Google or the beleaguered AOL, he could regret it later.
But it was Microsoft that put a halt to the negotiations, Mr. Yang told Reuters yesterday, leaving the door open to a possible deal in the future.
"We were negotiating a way to find common ground and then on Saturday they chose to walk away," he said. "If they have anything new to say, we would be open. … I am more than willing to listen."
Asked whether he believed Microsoft's move was a negotiating tactic, Mr. Yang said he took Microsoft CEO Steve Ballmer's letter announcing the withdrawal "at face value."
Striking any kind of formal arrangement with Google would have serious implications for Yahoo, said Canaccord Adams analyst Colin Gillis. "It would boost cash flow significantly, but you're handing the search market over, even if you do it on a selective basis," he said. "Clearly, there's a ticking clock on him [Mr. Yang]."
Yahoo's best option would be to execute on the game plan it has already laid out, Mr. Gillis said. However, Mr. Gillis described Yahoo's recent execution track record as "poor."
Mr. Yang returned to the top job at Yahoo nearly 11 months ago to rebuild the company he founded in 1994. Although Yahoo has revamped its search engine, expanded its online properties and invested heavily in its mobile offerings, the company still lags Google's share of the online advertising market.
In March, Yahoo unveiled a new three-year financial plan to investors that promised to deliver net revenue growth of 25 per cent in 2009 and 2010 — up from about 12 per cent in 2007 — and increase revenue to $8.8-billion by 2010.
