Yang was elected CEO in June 2007, his second go-around at that post. Since then, Yahoo’s market value has fallen by more than $20 billion, according to Bloomberg.

To be fair, Yahoo was already losing its market share to Google Inc. (GOOG) and a healthy percent of its share value as a result.

But Yang was brought back to fix that.

There was a deep feeling within Yahoo’s ranks that Yang wasn’t fit to continue leading the company out of the mire – or least into a profitable merger/acquisition situation – because he had burned too many bridges trying to get what he felt was the fair value of Yahoo’s shares.

In the year and a half he ran the show, Yang sternly rejected several takeover offers from Microsoft, including a $47.5 billion bid that amounted to $33 a share. The offer valued Yahoo’s share at a 62% premium at the time.

This led to a proxy battle instigated by board member Carl Icahn, who wanted to oust Yahoo’s board of directors and replace it with candidates of his choosing. Icahn – it should be noted – favored a Yahoo partnership with Microsoft over Google.

Earlier this month, Google walked away from a plan announced in June to sell advertisements on Yahoo’s pages after the Justice Department threatened to block the deal on antitrust grounds.

Google already has more than 70% of the search-engine driven advertising market. Yahoo has about 10%, according to BusinessWeek. For Yang, it was a chance to revive falling sales, as profit has dropped in 10 of the last 11 quarters.

And that’s caused the company to shed a lot of dead weight.

Last month, it announced 1,500 job cuts. And, Scott Moore, the senior vice president in charge of the company’s media group, recently announced he, too, is leaving.

In addition to Moore, Yahoo shed five top executives this past summer: Jeff Weiner (executive V.P. of the network division), Brad Garlinghouse (who oversees e-mail and instant messaging), Vish Makhijani (general manager of web search), Qi Lu (top engineer for search marketing) and Joshua Schachter (founder of social bookmarking site, delicious).

So Now What?

Instead of first saying that Yang is stepping down, Yahoo’s news release begins by announcing it has begun a search for a new CEO.

Yahoo Chairman Roy Bostock said the company is searching internally and externally for candidates, and is being aided by executive search firm Heidrick & Struggles.

“Jerry and the Board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level,” Boystock said in the release.

Some of those candidates include Yahoo President Susan Decker. Other names floated include Jonathan Miller, the former chairman of AOL; Dan Rosensweig, once Yahoo’s operations chief; and Meg Whitman the former chief of Internet auctioneer EBay Inc., Bloomberg reported citing UBS analyst Ben Schachter.

Whoever gets the job is getting a difficult one with high expectations.

But one could argue that Yang’s follies lowered expectations. At this point, it’s understood that Yahoo can’t unseat Google as the world’s top search-engine advertiser – at least on its own.

Many board members and shareholders wanted Yang to sell Yahoo to Microsoft. If not that, then find another partnership to gain at least some traction against Google.

Before Yang’s departure, Yahoo’s shares dipped to $9.75, their lowest level since 2003. And on top of all of Yahoo’s problems, the global stock market is bracing for a cold year.

There’s a good chance that the role of Yahoo’s next CEO won’t be leading the company out of its mess, but instead wave the white flag in front of a company that can.

Source: Yang Steps Down, Yahoo CEO Search Commences

But while Yang insists the deal will generate an extra $800 million a year in revenue, shareholders and analysts alike are skeptical the company will be worth the $33 a share Microsoft Corp. (MSFT) was offering just months ago.

In accordance with the deal reached last week, ads from both Google and Yahoo will appear on Yahoo’s search results. Yahoo has acknowledged that Google is more efficient in targeting online search audiences, estimating the larger search engine generates up to 70% more revenue per click for its ads. And it hopes that access to Google’s AdSense technology will enhance its own targeting capabilities.

According to Yahoo, the deal could boost cash flow by $250 million to $450 million in the first 12 months of implementation.

Google, on the other hand, will receive added revenue from having its ads posted on the country’s No. 2 search engine.

“Clearly, it is time to move on, and we believe that this agreement with Google does so by strengthening our competitiveness,” Yang said in a statement.

What Yang would like to move on from is a $44.6 billion failed takeover bid from Microsoft that would have netted Yahoo shareholders $33 a share.

Yahoo- which has suffered through eight straight quarters of declining profits- rejected Microsoft’s offer Feb. 11, saying it substantially undervalued the company’s worth. The original $31-per-share offer valued Yahoo at a 62% premium on Feb. 1.

After its second bid was rejected, a frustrated Microsoft turned its back and walked away. This infuriated Yahoo shareholders who had seen the bid as the company’s last chance to regain profitability. A contingent led by Carl Icahn instigated a proxy battle, seeking to oust Yahoo’s current board of directors and replace it with candidates of his choosing.

Icahn owned 10 million Yahoo shares and options to buy 49 million as of May 15, Bloomberg News reported. Investors BP Capital LLC Chairman T. Boone Pickens and hedge-fund manager John Paulson are reportedly backing his slate of nine directors, which includes himself and former Viacom Inc. (VIA) chief Frank Biondi Jr. The attempted coup has major ramifications for the Google deal in that it will be void should Icahn win the battle.

Also, if Microsoft- which Icahn has worked desperately to woo back into discussions- changes its mind and makes another off for the company, it will have to pay Google $250 million to end the partnership.

In addition to interference from activist investors, the deal will also have to clear regulatory hurdles as it couples the nations two largest search engines. Both companies have said the deal does not require regulatory approval, but that they would delay its implementation for up to three and a half months to give the U.S. Department of Justice a chance to review it.

“This collaboration between two technology giants and direct competitors for Internet advertising and search services raises important competition concerns,” Sen. Herb Kohl (D-Wisc.), chairman of the Senate Antitrust Subcommittee, said in a statement. “The consequences for advertisers and consumers could be far-reaching and warrant careful review, and we plan to investigate the competitive and privacy implications of this deal further in the Antitrust Subcommittee.”

Microsoft has said in the past that a deal between Yahoo and Google would consolidate more than 90% of the search ad market.

However, even if the deal goes through, Yahoo is basically relying on its biggest rival for growth. Both Merrill Lynch & Co. Inc. (MER) and Citigroup Inc. (C) have cut their estimates on Yahoo’s stock price saying advertisers will likely shift more spending over to Google.

Yahoo’s stock fell as low as $21.83 a share, Friday, down more than 7% from Thursday’s close. Even if the deal lives up to Yang’s billing, it seems unlikely the stock will reach the $33 a share Microsoft had offered any time in the near future.

“This [deal] just reaffirms the view that Yahoo, and particularly Jerry Yang and [cofounder] David Filo, blew it,” Mark May, an analyst at Needham & Co. told Bloomberg. “It’s going to be hard for Yahoo to come back from blowing what might be, looking back, the major milestone in Yahoo’s corporate history.”

Source: Yahoo Grasping at Straws with Google Deal

Two weeks ago, Yahoo Chairman of the Board and co-founder Jerry Yang rebuffed Microsoft’ $47.5 billion (or $33 a share) bid, sending shares down $4.43 (or 15%) to $24.24. That of course didn’t bode well for Icahn, who said he owns 59 million Yahoo shares.

“The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft,” Icahn said in his letter. “I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.”

If necessary, Icahn’ strategy is to seek antitrust clearance from the Federal Trade Commission to purchase up to $2.5 billion worth of shares – about a 6% stake. Also, with all of Yahoo’ 10 board members up for re-election on July 3, Icahn will move to nominate his own list of board candidates, one being Mark Cuban.

Reviving talks with Microsoft won’t be easy, as rhetoric increasingly intensified between Yang and Microsoft CEO Steve Ballmer during takeover negotiations.

But if anyone has the experience and moxie to push talks further, it’ Icahn, who has used his clout to push action at struggling mobile phone pioneer Motorola Inc. (MOT) and drugmaker ImClone Systems Inc. (IMCL).

Most recently, Icahn has been at the forefront of Blockbuster Inc.’ (BBI) up-to $1.35 billion bid for Circuit City Stores Inc. (CC). If that deal falls through, Icahn said he would acquire the struggling electronics retailer.

In his letter to Yahoo, Icahn said the board “completely botched” a successful merger with Microsoft and that he is acting on shareholders’ behalf to establish a new board.

Icahn also penciled his name in as one of the nominees for Yahoo’ board.
“I think he’ playing his cards pretty smart here,” Troy Mastin, an analyst at William Blair & Co., told Bloomberg Television. “I wouldn’t be surprised to see Microsoft and Yahoo together in the next few months.”

Source: Yahoo ‘Completely Botched’ Microsoft Merger