Jerry Yang leaves Yahoo up in the air

Co-founder's departure opens doors, raises questions

The departure of Yahoo co-founder Jerry Yang opens a world of new possibilities for the beleaguered Internet content giant, but no easy fixes.

The surprise exit stunned the markets and pushed Yahoo shares higher in after-hours trading. Yang’s exit–which is expected to be followed by an exodus of others on the company’s board–was conveyed in a letter released Tuesday by the company from board chairman Roy Bostock, who could be one of the next to go.

“As I leave the company I co-founded nearly 17 years ago, I am enthusiastic about the appointment of Scott Thompson as chief executive officer and his ability, along with the entire Yahoo leadership team, to guide Yahoo into an exciting and successful future.”

Yahoo appointed Thompson earlier this month after months without a CEO and amidst constant rumors that the company was up for sale. Yang had been pilloried by investors, some of whom blamed him for botching a possible takeover by Microsoft several years ago and for creating confusion about his role lately in discussions with potential partners.

That list of partners is bound to grow once again now that Yahoo could conceivably set itself up for the kind of acquisition Yang never saw fit to greenlight or perhaps a shopping spree of its own. Private equity groups have been kicking the company’s tires since the ouster of CEO Carol Bartz last year, and they could come knocking again with or without congloms ready to take a controlling interest, such as Microsoft.

But analysts have also noted that Yahoo may want to stay independent and grow by making strategic acquisitions with a scale capable of transforming the company. Potential targets that have been mentioned in recent weeks include Netflix, WebMD and The Weather Channel.

An even likelier transformative move that Yang may not have cottoned to is a divestiture, with Yahoo’s Asian assets subject to speculation that a spinoff could return as much as $11 billion to company coffers.

And yet it’s also entirely possible that Yang’s exit is less about objections over being bought, buying or selling, and more a difference in opinion regarding the strategic direction of Yahoo. The company has been long criticized for lacking focus given its interests are dispersed across many different areas from mobile to connected TV.

The appointment of Thompson, formerly of PayPal, has kicked up concerns that Yahoo will push into e-commerce, the new CEO’s area of expertise. That may or may not distract from one of the few areas where Yahoo has undisputed leadership: online content.

Yahoo is either first or second in 11 different content categories, where its properties are competitive with major brands from CNN to ESPN. The company has moved heavily into original video programming over the past 12 months, most recently announced a venture with Tom Hanks, that it hopes will help drive advertising revenues in proportion with its massive traffic figures.

Yang steps down removes from the boards of both Yahoo and subsidiaries Yahoo Japan and Alibaba. He will still retain a 3.8% stake in the company.

Yang co-founded Yahoo in 1995 with David Filo and took it public in 1996. He has served as a member of the Board of Directors since March 1995 and as CEO from June 2007 to January 2009.

“Jerry Yang is a visionary and a pioneer, who has contributed enormously to Yahoo during his many years of service,” said Bostock.

Jill Goldsmith contributed to this story.