Yahoo: Pondering Yang's replacement; The next move

Now that Yahoo CEO Jerry Yang is out, the handicapping begins. Who will be Yang's replacement and what will that choice reveal about Yahoo's future?

Now that Yahoo CEO Jerry Yang is out, the handicapping begins. Who will be Yang's replacement and what will that choice reveal about Yahoo's future?

The story line (Techmeme) revolving around Yang's departure is familiar. Yang took over the company at the second worst time in Yahoo's history (2001 would have been worse), failed to seal a merger deal with Microsoft and got into a messy proxy battle with Carl Icahn. Icahn, now on the board of directors at Yahoo, likely orchestrated Monday's Yang as chief Yahoo move.

Also see: With Yang out as Yahoo CEO, Steve Ballmer licks chops

Let's recap the facts:

  • Yahoo shares are in the gutter, roughly $21 below what it could have had if it quickly accepted Microsoft's takeover offer;
  • Yahoo can aggregate eyeballs better than anyone and is a valuable media property;
  • The company is on to something with its open platform;
  • Yahoo has three options: Stay independent, merge with AOL (a deal most folks think is a train wreck in the making) and partner with Microsoft.
  • The ad market stinks and Google is running away with the field.
  • Yahoo's next move in its CEO search will telegraph its intentions.

Piper Jaffray analyst Gene Munster says in a research note:

We believe Yang's replacement should offer insight as to the company's future intentions of either continuing to compete on its own or looking for a new acquisition/partnership agreement. Specifically, we believe the appointment of a well-known industry veteran with a solid track record would signify the intention to continue competing under its own control. In this scenario, we believe that Yahoo! would likely continue to explore search outsource deals if they make financial sense to the company, but would also focus on strengthening its core display assets. If the company replaces Yang with choice from within the company, we believe it would likely signify the intention to partner or be acquired as the future vision for the company.

Here's a look at Yang's possible replacements and what it means to the company.

Nobody: Yahoo could simply run itself for now. And with Yang out of the way Micros

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oft could swoop in. The odds are strong that Microsoft will eventually own Yahoo.

Jonathan Miller: Former CEO of AOL. If there's a CEO job open, Miller (right) is often mentioned. Youseff Squali at Jeffries surmises:

While Jonathan has Internet experience, his track record at AOL is mixed. Like Yang, he inherited a tough situation, with AOL's access business in a secular decline. Carl Icahn tried to get him on the board but failed when Time Warner refused to relax his non-compete. If the CEO search were to extend into 2009, his chances increase. Another possibility is for Yahoo to acquire AOL with Miller part of the deal.

That scenario is plausible but you still have the two turd question. Do two turds--Yahoo and AOL--make an Internet juggernaut even if you land Miller as CEO?

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Peter Chernin: He's president and chief operating officer of News Corp. and brings a lot to the table. If Chernin (right) got the nod it's likely that Yahoo would focus on being a media company and a Microsoft search deal happens.

Sue Decker: She's president of Yahoo, quite capable of being a CEO and has a lot of baggage. Why? She went along for the ride during the Microsoft merger talk fiasco. And if Decker were really to become CEO she would have been named yesterday.

Jeffrey Lindsay, an analyst at Bernstein, says:

Though the announcement contained the boilerplate "both internal and external candidates," we believe that it is unlikely that the post will be offered to an insider such as President Sue Decker, whose credibility has likely been damaged severely by

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the company's decline.  Though unlikely, we would view her appointment as CEO as a net negative bringing less credibility and leadership than Yang and nothing new in terms of ideas or vision.

Tim Armstrong: At Google, Armstrong (right) is president of the search giant's Americas operations. He's a good pick, but would clearly indicate that Yahoo is betting that it can stay independent.