Yahoo faces uncertainty after Yang’s exit

The exit of Yahoo co-founder Jerry Yang from the internet company’s boardroom brought a degree of relief for long-suffering investors on Wednesday, with Yahoo’s shares up more than 3 per cent.

But uncertainty about what has really been going on inside the Yahoo boardroom, along with doubts about whether the departure will do much to help the company complete a difficult strategic repositioning, left the response decidedly muted.

Mr Yang’s resignation marks a milestone in the life of the internet company he founded 17 years before and came as a surprise even to investors who have bristled at his continuing influence. He also resigned from the boards of Alibaba and Yahoo Japan, the Asian internet concerns in which Yahoo holds significant stakes.

The departure was widely expected to ease the company’s negotiations over the sale of its Asian interests, which together account for the lion’s share of its stock market value of nearly $20bn. Echoing a common view on Wednesday, analysts at Goldman Sachs wrote in a note to clients that the resignation “removes one hurdle in the long-running strategic review of the company’s options”.

Yahoo’s board has insisted vociferously in recent weeks that Mr Yang has shared the same interests as other directors. But his involvement in the company’s strategic deliberations – including his personal discussions with private equity firms over potential investments that have been unpopular with some shareholders – has left a lingering doubt over his motivations.

That marks a continuation of the distrust that has lingered since 2008, when his personal handling of the failed negotiations over a Microsoft acquisition left some shareholders questioning whether Mr Yang was unwilling to see control of the company he co-founded slip away.

Even if his departure clears one potential obstacle, though, Yahoo still has a difficult path to navigate as it tries to extract more value from its most valuable assets, while at the same time trying to head off a shareholder revolt and rebuild its core internet operations.

The resignation has set the stage for a two-month tussle that will now determine whether it is given the time to try to complete the turnround. New York hedge fund manager Dan Loeb has threatened to challenge the re-election of Yahoo directors at this year’s shareholder meeting, giving the company until late March – the date by which he will have to formally announce his intention to wage a proxy war – to appease both him and other discontented investors.

As the first in an expected series of boardroom departures, Mr Yang’s resignation looks like an early move in that tussle. Bringing in fresh blood would pre-empt Mr Loeb and could inject new urgency into its pursuit of deals to increase shareholder value, according to some observers. “The more the board does, the less there is need to give up seats [to Mr Loeb],” said one Yahoo shareholder who has also been pressing for more drastic action to boost the Yahoo share price.

Before giving a revamped Yahoo board a free pass, however, shareholders are also likely to press for more headway on the company’s negotiations to shed its Asian holdings. These are convoluted deals: to win tax-free status in the US, Yahoo would have to accept assets as well as cash as compensation, raising a question about what other business operations its Asian partners would offer as part-payment.

One shareholder warns that such deals could be further delayed by the recent appointment of a new chief executive. As chief for barely a week, former PayPal chief executive Scott Thompson is likely to want a say in any such decisions.

But with the clock ticking, Yahoo’s board must press ahead into the company’s post-Yang future.

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