Yahoo Co-Founder Jerry Yang Exits Company

Jerry Yang is exiting the Yahoo! Inc (YHOO). board and its management team, the latest casualty of an overhaul that led to the ouster of Chief Executive Officer Carol Bartz and left the company in search of strategic options.

Yang, who started Yahoo in 1995 with David Filo, also left the boards of Yahoo Japan Corp. and Alibaba Group Holding Ltd., Asian Web companies Yahoo partly owns, Yahoo said today in a statement. Scott Thompson, former president of EBay Inc. (EBAY)’s PayPal unit, was named CEO on Jan. 4 after a four-month search.

“Jerry’s thrown in the towel,” said Colin Gillis, an analyst at BGC Partners LP in New York, who rates the stock a “hold” and doesn’t own it. “He founded the company -- this is his baby.”

Yang, 43, whose company helped pioneer Web content and searching in the 1990s, exits Yahoo as it struggles to compete with Google Inc. (GOOG) and Facebook Inc. for online users and advertising dollars. As it seeks ways to revive the company and placate impatient investors, Yahoo has considered selling its stakes in its Asian partners, including Alibaba, and has fielded proposals from private equity groups to sell a stake in itself.

“By clearing out some artifacts of the past, it’s symbolic of the company’s desire to move forward,” said Allen Weiner, an analyst at Gartner Inc. in Austin, Texas. “With Jerry out of the way, it will perhaps make negotiations with the folks at Alibaba easier.”

Alibaba Group spokesman John Spelich didn’t immediately respond to messages left seeking comment.

Yang, who had the position of “chief Yahoo,” was CEO from June 2007 to January 2009. After the Sunnyvale, California-based company rejected an acquisition offer from Microsoft for $47.5 billion, Yang was replaced by Bartz as CEO, who was fired by the company in September 2011.

Yahoo investor Third Point LLC late last year demanded two board seats and asked for Yang to step down as a director. Third Point CEO Daniel Loeb cited the “board’s inability -- or perhaps unwillingness -- to properly solicit true strategic alternative bids, let alone to negotiate them,” in a November statement. Third Point already had called for Chairman Roy Bostock to step down last year.

Yahoo shares fell less than 1 percent to $15.43 at the close in New York today. They jumped as high as $16.48 after the announcement. The stock declined 3 percent last year.

Born in Taiwan and raised in San Jose, about 10 miles south of Yahoo’s headquarters, Yang co-founded Yahoo as a Stanford University doctoral student. In 1996, Yang and Filo took the company public with CEO Timothy Koogle.

As traffic on the Web soared, so did advertising revenue, helping Yahoo’s stock market value surge to more than $100 billion. Then the market collapsed during the dot-com bust. After peaking in January 2000, Yahoo shares lost 97 percent of their value before bottoming out in September 2001. Today, the company is valued at about $19.1 billion.

Yahoo had already been through management and identity shifts before Bartz’s reign. Terry Semel, a Warner Bros. movie executive who knew Yang from an Allen & Co. media conference in Sun Valley, Idaho, replaced Koogle as CEO in 2001 and stepped up efforts to make the company a media hub. While Semel presided over five years of more than 20 percent sales growth, the company lost its lead in Internet ads to Google.

When Yang became CEO in June 2007, he vowed to renew the struggle against Google’s growing dominance.

“I’m ready to dig in and make sure we can take Yahoo to the next level,” Yang said at the time.

Microsoft (MSFT)’s Offer

In 2008, after Yang failed to jump-start sales growth, Microsoft stepped forward to acquire Yahoo -- an offer that Yang spurned. Yang tried to assuage investors with a partnership with Google, though that effort fell apart. The company later forged an agreement with Microsoft, the world’s largest software maker, to share Internet-search operations.

Yang’s handling of the Microsoft negotiations rankled investors at the time, including billionaire Carl Icahn, who successfully lobbied to add new board members in 2008. Icahn, who is no longer on the board, sold the last of his stake in 2010.

“My time at Yahoo, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life,” Yang said in a letter to Bostock included in today’s statement. “However, the time has come for me to pursue other interests outside of Yahoo.” Yang didn’t respond to a request for an interview.

Yang still owns 46.6 million shares, or 3.8 percent of the company’s outstanding stock, according to a Nov. 25 filing.

“We appreciate Jerry’s comments and share his enthusiasm for the company’s prospects,” said Bostock. “With Scott Thompson leading an outstanding team of Yahoos to deliver innovative products and an engaging customer experience, Yahoo’s future is bright.”

To contact the reporter on this story: Brian Womack in San Francisco at [email protected]

To contact the editor responsible for this story: Tom Giles at [email protected]