Yahoo Co-Founder Jerry Yang Leaving Company

Associated Press + More

SAN FRANCISCO — Yahoo co-founder Jerry Yang is leaving the struggling Internet company, as it tries to revive its revenue growth and win over disgruntled shareholders under a new leader.

The departure, announced Tuesday, punctuates the end of an era at Yahoo, a tarnished Internet icon that has spent much of the last decade scrambling to catch up to Internet search leader Google Inc. — a company that got early encouragement and advice from Yang. It comes just two weeks after Yahoo Inc. hired former PayPal executive Scott Thompson as its CEO.

[5 Lessons From Yang's Fall]

Thompson is the fourth CEO in less than five years to try to turn around Yahoo. It's a daunting assignment that Yang was unable to pull off during his own tumultuous 18-month reign as the company's CEO in 2007 and 2008.

Yang, 43, endorsed Thompson in his resignation from Yahoo's board of directors. He had been on Yahoo's board since the company's 1995 inception.

"My time at Yahoo, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life," Yang wrote in a letter to Yahoo Chairman Roy Bostock. "However, the time has come for me to pursue other interests outside of Yahoo."

The letter didn't say what Yang plans to do next. He doesn't need to work, thanks to the fortune he has amassed since he began working on Yahoo in a trailer at Stanford University with fellow graduate student David Filo. Yang is worth about $1.1 billion, according to Forbes magazine's latest estimates.

Yang is also stepping down from the boards of China's Alibaba Group and Yahoo Japan. Yahoo is negotiating to sell its stakes in both of the Asian companies as part of its efforts to placate investors. The deal could be worth as much as $17 billion, but it still faces a series of potential stumbling blocks.

Besides surrendering the board seats, Yang is giving up his position as "Chief Yahoo," an honorary title he held as he mingled among workers, while keeping tabs on various company projects.

Thompson could have an easier time overhauling Yahoo without Yang looking over his shoulder and possibly second guessing his decisions, said BGC Financial analyst Colin Gillis.

"This has the fingerprints of frustration on it," Gillis said. "It's one of those situations where it looks like (Yang) is losing the battle to control the company's direction and now he is saying, 'That's it, I'm out.'"

Although a popular figure among Yahoo employees, Yang had alienated the company's shareholders by turning down a chance to sell Yahoo in its entirety to Microsoft Corp. for $47.5 billion, or $33 per share, in May 2008. Yahoo shares haven't topped $20 for more than three years. The stock gained 44 cents to $15.87 in extended trading after Yang's decision was announced.

The slump in Yahoo's stock has diminished Yang's wealth. He still owns a 3.6 percent stake in the company.

Yang conceivably could leverage those holdings to attempt to buy Yahoo's U.S. business after the Asian investments are sold. That is, if he can line up additional financing, Macquarie Securities analyst Ben Schachter wrote in a research note late Tuesday. Several buyout firms have already expressed interest in buying a substantial stake in Yahoo, spurring speculation that Yang might work with them to acquire a controlling interest in what remains of the company if the Asian assets are sold.

When he announced Thompson's hiring earlier this month, Bostock stressed that Yahoo intended to remain an independent, publicly traded company.

Yang had been someone more interested in preserving the company than he created than dismantling parts of its to boost the stock price, analysts said. "Investors tend to want to keep trying to fix the company than carve it apart," Gillis said.

Now that he is out of the way, investors are likely to conclude the sale of the Asian investments will eventually be completed, Schachter wrote.

Investor anger over Yang's handling of the Microsoft negotiations led to his resignation as CEO in late 2008 and the hiring of Silicon Valley veteran Carol Bartz to replace him. Bartz and Yang had gotten to know each other as part of Cisco Systems Inc.'s board of directors.