First appeared in the Wall Street Journal
Jerry Yang rode Yahoo Inc.'s swift rise and subsequent
decline over 17 years. Now the co-founder of the onetime dominant Internet
company has decided to stop hanging on.
Mr. Yang, 43 years old, said Tuesday he was resigning from
Yahoo's board, severing ties to the company he co-founded with David Filo in
1995 while both were Stanford University graduate students. Mr. Yang also said
he would leave the boards of Yahoo Japan Corp. and Alibaba Group Holding Ltd.,
in which Yahoo owns significant stakes.
Mr. Yang has been under pressure for weeks, grappling with
criticism over his multiple roles at the Sunnyvale, Calif., company—including
co-founder, director, former chief executive and large shareholder. Some
investors questioned whether Mr. Yang had conflicts of interest as Yahoo in
recent months explored its strategic options, including whether to sell all or
part of the company.
Mr. Yang is leaving after Yahoo this month hired a new chief
executive, Scott Thompson, the former president of eBay Inc.'s PayPal unit. He
fills a void created four months earlier when the board fired Carol Bartz.
Yahoo is also closing in on a deal to shed its Yahoo Japan and Alibaba stakes
without creating a hefty tax bill.
Activist investor Dan Loeb's Third Point LLC in recent
months has threatened a proxy fight against Yahoo and called for the
resignation of Mr. Yang and several other directors. In a reflection of
investor sentiment toward Mr. Yang, Yahoo's stock gained 3% to $15.90 in
after-hours trading after the co-founder announced his departure from the
company's board.
Mr. Yang himself made the decision to exit Yahoo's board,
said two people familiar with the situation. Mr. Yang didn't immediately inform
all of his fellow directors that he would step down, these people added.
In making his decision, Mr. Yang also didn't discuss
potential external pressures facing the board, said one of the people.
"Mr. Yang just decided that now was the time," this person said. "Anything
else is speculation."
But another person familiar with the situation said Mr. Yang
may have wanted to avoid being a target if a proxy fight were to occur.
"He's rich. He doesn't need all this [fuss],'' this person said. "He
has a great reputation and he doesn't need it sullied.''
Mr. Yang's departure comes several weeks before shareholders
can nominate rival directors to Yahoo's board, beginning Feb. 24, though the
company could postpone the schedule. All nine Yahoo directors are up for
re-election this year. Yahoo hasn't yet announced the date for this year's
annual shareholder meeting.
Earlier this month, The Wall Street Journal reported the
company was searching for several new board candidates to replace possible
outgoing directors, including Chairman Roy Bostock, according to people
familiar with the matter.
In a statement, Mr. Yang said "the time has come for me
to pursue other interests outside of Yahoo." He didn't respond to requests
for further comment.
A spokeswoman for Yahoo said she had no information about
whether Mr. Yang would be replaced and who would take his posts on the boards
of Alibaba and Yahoo Japan.
Mr. Yang's exit is the latest chapter for Yahoo and
underlines the widening gap between old Internet companies and newer ones.
Yahoo was part of an earlier crop of Web companies from the 1990s that helped
spark the dot-com boom and came of age as users world-wide began going online.
But after riding that wave, new companies such as Google
Inc. and Facebook Inc.—often with younger leaders like 27-year-old Mark
Zuckerberg at Facebook—came to prominence with Web technologies such as search
and social networking, leaving older firms like Yahoo struggling to catch up.
The resignation of Mr. Yang—who as of November still owned a
3.8% stake in Yahoo, compared with a 5.9% stake held by co-founder Mr. Filo—is
a far cry from the glory days of Yahoo. The company began as a hobby for
Messrs. Filo and Yang, who created "David's and Jerry's Guide to the World
Wide Web," a list of their favorite websites.
In 1995, the duo dropped out of Stanford, took a $2 million
investment and incorporated Yahoo. The founders chose the name Yahoo largely
for its dictionary definition: "rude, unsophisticated, uncouth,"
according to an official company history.
When consumers started surfing the Web in the mid-1990s,
Yahoo became their trusted guide, a kind of Yellow Pages for the new age. Yahoo
went public in 1996 in an IPO that instantly made Messrs. Filo and Yang
multi-millionaires. The company adopted an anti-corporate image, with
executives who wore jeans and put their feet on their desks.
Mr. Yang, the more visible of the two co-founders, quickly
became a poster child of the dot-com boom. At its peak in 1999, Yahoo was worth
more than $120 billion—bigger than companies such as Cisco Systems Inc. and
Hewlett-Packard Co. today.
But even then, the seeds of Yahoo's decline were being
planted. The company failed to realize a crop of "algorithmic"
Web-search engines such as Google were a potential threat to its business. More
recently, Yahoo grappled with the rise of Facebook while failing to establish a
big footprint in mobile devices and new methods of selling online ads.
"The near-term Wall Street reaction is that he [Mr.
Yang] wasn't doing a good job, but the longer-term perspective is that he will
go down as one of the top 10 Internet entrepreneurs," said Mark Mahaney,
an analyst at Citigroup Inc. who has been covering the Internet industry since
1998.
During the dot-com bust last decade, Mr. Yang used his star
power to help Yahoo draw in badly needed advertisers by meeting with them
personally. "For big clients, Jerry was the man," said Greg Coleman,
a former top Yahoo executive. "He was the iconic rock star…and he knew how
to work that magic."
In the mid-2000s, Mr. Yang fostered a friendship with Jack
Ma, CEO of Alibaba Group. In 2005, Yahoo opted to hand its Chinese operations
over to Alibaba, while buying a 40% stake in the Chinese firm for $1 billion.
That stake was recently estimated at $14 billion, making it one of Yahoo's most
valuable assets.
On Tuesday, Mr. Ma said his relationship with Mr. Yang
"has withstood some ups and downs over the past few years, and I have
great respect for what he has built and I wish him well."
Mr. Yang was Yahoo CEO between mid-2007 and early 2009,
during which time he grappled with an offer from Microsoft Corp. in 2008 to buy
Yahoo for more than $45 billion. Mr. Yang and fellow directors turned down the
offer, igniting a barrage of criticism.
In an on-stage interview at a conference in San Francisco
that year, Mr. Yang deflected suggestions he had let his feelings for Yahoo
cloud his decision making. "I know I will be labeled with that
forever," he said.
After Ms. Bartz became Yahoo CEO in 2009, Mr. Yang receded
from the spotlight. Following her firing last September, Yahoo began
entertaining potential investments by private-equity firms to take a
controlling or minority stake in the company.
Some Yahoo investors expressed concerns because one of the
proposals discussed by Yahoo's bankers involved Mr. Yang aligning himself with
a private-equity firm or other buyers and becoming part of a new Yahoo
ownership group, people familiar with the matter have said. The activist hedge
fund Third Point said Mr. Yang must "declare whether he is a buyer or a
seller—he cannot be both."
Yahoo denied there was any conflict and people close to
Yahoo said Mr. Yang was acting with the board's blessing and that he had
retained his own lawyer to advise him on potential conflicts. Another person
close to Yahoo said company directors hadn't expressed any concern about Mr.
Yang's motivations.
Within Yahoo, Mr. Yang stepped up his presence after the
firing of Ms. Bartz, people familiar with the matter have said. He has attended
high-level company meetings and been involved in engineering and corporate
development strategy, including Yahoo's $270 million acquisition of
ad-technology firm Interclick Inc., announced in November, these people said.
