'Chief Yahoo' Yang may make new CEO's task difficult
Yahoo! Inc., whose shares fell 65 percent since spurning Microsoft Corp.'s $44.5 billion takeover bid, may find hiring a replacement chief executive officer more difficult while "Chief Yahoo" Jerry Yang works down the hall.
Yang, 40, agreed to step down as CEO and resume his former advisory role on Nov. 17 after rejecting Microsoft's bid. The prospect of succeeding the Yahoo co-founder may not appeal to candidates fearful of second-guessing, said John A. Challenger, CEO of Challenger, Gray & Christmas Inc., a Chicago executive- placement firm.
"There's certainly the potential for trouble," said Heath Terry, an analyst at Arlington, Virginia-based FBR Capital Markets Corp. who has an "underperform" rating on the shares. "In the minds of Jerry, most of the board and employees, this is still Jerry's company."
Taiwan-born Yang will serve as CEO until a new one is hired, said Kim Rubey, a company spokeswoman. He wasn't available for comment, she said.
Yang's full-time job as Chief Yahoo focuses on global strategy, products and technology, according to a company blog. He'll also continue as a Yahoo board member.
Mozilla Corp.'s Mitchell Baker, Quiznos Corp.'s Gregory Brenneman and Hasbro Inc.'s Alfred Verrecchia are among 216 CEOs stepping down this year and remaining with their companies in another capacity, according to a survey this month by Challenger's firm. That's 22 percent fewer than in 2007 and 40 percent under 2006, the study found.
CEO Shuffling
"Boards are more assertive," said Challenger, 53. "They want to move the person out."
More than 90 of those who stayed were named chairman or co- chairman. Challenger's study reported that 1,257 CEOs of publicly traded and closely held U.S. companies lost their jobs in 2008, 10 percent more than last year. The higher number reflects the economic slowdown and falling stock prices, Challenger said.
The possibility for interference increases when the top manager who stays on is also a founder such as Yang, according to Allen Geller, managing director of Raines International, a New York-based executive-search firm.
"Think of it as Big Brother watching," he said. "That's what it could be like."
The path to Yang's removal as CEO began in February after he rejected Microsoft's $31-a-share offer, a 62 percent premium to Yahoo's price at the time. Yang said the company was worth more.
Carl Icahn and other shareholders pushed for Yang's resignation as prospects for the deal waned. The Redmond, Washington-based software maker reiterated on Nov. 19 it wasn't interested in buying the company. Icahn bought 6.78 million Yahoo shares between Nov. 24 and Nov. 26, raising his total stake to 75.58 million shares, according to a regulatory filing.
"Yahoo's problems are bigger than Jerry Yang," said James Friedland, an analyst with New York-based Cowen & Co. who rates the shares "neutral."
The next CEO may have to restructure the company for a sale, he said. That's "going to be a very un-Jerry Yang-like person."
News Corp. President Peter Chernin and former AOL CEO Jonathan Miller are among potential candidates for Yang's job, according to Laura Martin, an analyst with Soleil Securities Corp. in New York. Dan Rosensweig, a former Yahoo operations chief, may also be tapped, UBS analyst Ben Schachter said in a report this month.
Yahoo President Susan Decker is a candidate as well, according to Brad Williams, a company spokesman.
Any "strong successor" would require Yahoo to provide "a set of conditions to give him or her power," Challenger said. "If not, it will be hard for Yahoo to attract the very best people."
Yang was working as Chief Yahoo in 2001 when he picked Terry Semel, an ex-Warner Bros. executive he met at an Allen & Co. media conference in Sun Valley, Idaho, to become CEO.
Company co-founder David Filo, 42, is the other Chief Yahoo.
The relationship between Semel and Yang was "collaborative," according to Soleil Securities' Martin, who rates the shares "hold." "I think that Jerry has already proven he can do this," she said.
While Semel presided over five years of more than 20 percent sales growth, the company lost its lead in Internet ads to Google Inc. He left in June 2007 after revenue fell to half that of its rival. The board asked Yang to succeed him.
Semel, 65, now chairman and CEO of Windsor Media Inc. in Beverly Hills, California, declined a request for an interview, said his assistant, Marisa O'Neil.
Clashes With Jobs
Yang isn't a hard-driving executive in the mold of Apple Inc. co-founder Steve Jobs, said Paul Saffo, a technology forecaster at Stanford University's engineering school in Stanford, California.
Jobs, 53, clashed in the 1980s with CEO John Sculley, who didn't share his passion for technology, Saffo said. The chief executive and board ousted Jobs in 1985.
"John Sculley was trying to manage a company," Saffo said. "Steve Jobs was trying to change the world."
The Apple founder returned in 1997 and renewed growth with products such as the iPod music player.
Google CEO Eric Schmidt, 53, hasn't been stifled by founders Larry Page and Sergey Brin since he joined the company in 2001, Saffo said.
"Eric has actually done this better than anyone else I've seen in the valley's history -- he was like an indulgent parent," he said.
Yang has the right temperament to work with future CEOs, Saffo said.
"I think Yahoo would be hurt by Jerry departing entirely," he said. "Jerry is the touchstone. Yahoo needs to remember its origins, and it needs to remember its mythology."