In a memo to staff today, Mr. Yang said he will leave the top job and return to being "Chief Yahoo," the role he had before replacing former studio boss Terry Semel as CEO in the summer of 2007, as soon as the board of directors identifies a replacement.
"Last June, I accepted the board's request that I assume the CEO role to restructure and reposition the company as a whole in order to more effectively meet the fast-changing needs of both users and partners," he wrote. "Since taking on the CEO role, I have had an ongoing dialogue with the board about succession timing ... and we believe the time is now right to transition to a new CEO who can take the company to the next level."
Beset by issues
Mr. Yang's decision to step down comes on the heels of a failed search deal with Google, a key to his strategy to rebuild the portal, and a thwarted takeover attempt by Microsoft, which would have paid Yahoo shareholders $33 a share for a company now trading at $10.63 (shares rose nearly 5% in after-hours trading today).
The company now faces a worsening market for online display ads, Yahoo's biggest business and the sector most challenged by the general economic downturn and slimmed-down marketing budgets. J.P. Morgan's Imran Khan is predicting 6% growth in online display advertising in 2009, but others are predicting a much steeper drop from the double-digit gains of the past five years.
Talks of a combination with Time Warner's AOL are said to be ongoing, but sides remain far from a deal, and transition at the top likely means that any deal, if still an option, won't be consummated anytime soon.
CEO search by Heidrick & Struggles
The decision does open the door to new leadership at the company, which is poorly managed in the eyes of Wall Street. Executive search firm Heidrick & Struggles has been retained to lead the search. Among possible outside candidates are former AOL Chairman-CEO Jonathan Miller, now partner at investment firm Velocity Interactive Group, and former Yahoo Chief Operating Officer Dan Rosenweig, a partner at media hedge fund Quadrangle Group, which is shutting down operations.
It's unclear to what extent Mr. Yang's departure could rekindle Microsoft's interest in making another run at the company. Yahoo Chairman Roy Bostock also opposed the deal, but new board member and billionaire investor Carl Icahn favored a deal with Microsoft.