By Peter Whoriskey
Washington Post Staff Writer
Wednesday, November 19, 2008
The day after Yahoo announced the imminent departure of chief executive and co-founder Jerry Yang, the stock market applauded.
The company's stock price jumped about 9 percent.
"With this CEO change will come hope that Yahoo will improve its performance," Citigroup analyst Mark S. Mahaney wrote in a note to investors.
What comes next for one of the nation's most popular Web companies is far from clear, however. The company is searching for Yang's successor. Meanwhile, the economic downturn is expected to eat away at advertising revenues, the company's mainstay. Its stock price has never returned to its heights during the dot.com bubble. And while Yahoo boasts myriad pages of information and entertainment, its overall identity is unclear and in each of its niches, it faces fierce competition.
"It's late for Yahoo," said Kathy Sharpe, chief executive of Sharpe Partners, a digital marketing agency in New York City. "They never anticipated a day when Yahoo wouldn't be king."
Yahoo, which began in 1994 as a project by Yang and fellow Stanford graduate student David Filo, cruised to prominence during the first dot.com era.
But since then it has failed to keep up with the evolution of the industry. Even as people began to navigate the Web using search engines, Yahoo's offerings seemed geared at consumers who would stay on the site, without venturing beyond. It didn't invest much in social networking, the Web trend that followed.
"They completely missed social networking," Sharpe said. "They have [photo-sharing site] Flickr but they didn't do anything with it. They have a foothold in Asia, but they're not doing anything with that either. They used to be the leader in behavioral targeting [for ads], but not so much anymore. When Yang blew the Microsoft deal, that should have been it. He should have walked away."
Indeed, legions of investors have blamed Yang for resisting a $44.6 billion buyout offer from Microsoft earlier this year.
Now that Yang is out of the chief executive job -- he will retain a spot on the board -- speculation has returned that Microsoft will once again try to buy up the company, only this time for a much lower price.
"Yahoo still has the biggest mass audience on the Internet and as such they have a lot of value," said eMarketer analyst David Hallerman. "Microsoft doesn't have that kind of reach."
Google voiced its immediate opposition to Microsoft's attempt to acquire Yahoo, saying it would seek to act like an Internet monopoly. It likely would revive those arguments were Microsoft to undertake another buyout attempt on Yahoo.
Asked whether Microsoft is weighing making another offer for Yahoo, Microsoft spokesman Jack Evans declined to comment.
Earlier this year, Microsoft had offered as much as $33 a share for Yahoo. Yesterday, even with the 9 percent jump, Yahoo was trading for $11.55 a share.
The lowered price has led to speculation that Microsoft might come in with another offer. That idea helped push the stock price up yesterday, analysts said, along with the hope that Yang's successor will have more success in refocusing the Web giant.
The search for a successor began a few weeks ago, and remains wide open, company sources said. Among the possible replacements being mentioned are News Corp. president and chief operating officer Peter Chernin, former AOL chief Jon Miller, former Fox Interactive Media head Ross Levinsohn and former Yahoo chief operating officer Dan Rosensweig.
"We believe Yang's departure will be viewed as a positive for the stock as there was investor dissatisfaction with his handling of the Microsoft offer earlier this year," Piper Jaffray analyst Gene Munster wrote. "Additionally, investors may view Yang's departure as a sign that a Microsoft return bid may happen as Microsoft had previously stated that it would not be able to reach an agreement with current Yahoo management."