Exits May Hurt Yahoo's Recovery

Key Executives Depart In Advance of Proxy Vote

Yahoo may have fended off a takeover bid by Microsoft, but the prolonged and continuing fight for control of the Internet giant appears to have left it a weaker company.

Facing a proxy vote forced by billionaire investor Carl C. Icahn on Aug. 1, Yahoo is experiencing an executive exodus that some compared to a "death spiral" and which analysts said will make its recovery more difficult.

Yahoo said at the beginning of the week that Jeff Weiner, recently executive vice president of the network division, had left to work at two Silicon Valley venture capital firms.

Then Caterina Fake and Stewart Butterfield, the husband-and-wife team who founded Flickr and sold it to Yahoo in 2005, announced their departures.

And on Thursday, three more executives were reportedly on their way out: Vish Makhijani, general manager of Yahoo Search; Qi Lu, executive vice president for search and advertising technology; and Brad Garlinghouse, senior vice president for communications and communities.

Those key departures were among dozens of others that the industry Web site TechCrunch put up on a spreadsheet.

"At one time, when Yahoo was perceived to be hip and cutting edge, a lot of the [Silicon] Valley talent wanted to be there," said technology industry analyst Roger Kay of Endpoint Technologies Associates in Wayland, Mass. "Now the company is perceived as a deer in the headlights, and people want to leave."

On the news of the departures, the stock price has plunged from the $30 price when the Microsoft offer was in play to $21.99 at the close of trading yesterday.

"With human capital historically having been one of Yahoo's greatest assets, we see these developments as a material negative," Standard & Poor's information technology analyst Scott Kessler wrote in a research note. "We think a restructuring is (in) the offing and that morale is likely relatively low."

In response to the departures, the company issued a statement saying that it was experiencing "the attrition that's to be expected in the Internet industry."

"We have a deep and talented management team across all areas of the company," the statement said.

Yahoo, which began as a student project of two Stanford electrical engineers in 1994, soon rose to become one of the Web's most popular destinations and remains so today.