The end of an era

Yahoo after Yang: Analysts react

It's officially the end of an era for Yahoo. For real, this time.

Yahoo co-founder Jerry Yang announced late yesterday he was resigning from Yahoo's board, ending a 17-year reign at the Internet company that began back in his Stanford University graduate school days in the mid-1990s.

The departure of Yang, who stepped aside for a second time as CEO in late 2008 following the failed Microsoft takeover, potentially paves the way for Yahoo to sell some of its value Internet properties, such as Alibaba or Yahoo Japan.

The timing of Yang's resignation is also interesting, especially since the ink is still drying on the contract former PayPal Chief Scott Thompson recently signed to become Yahoo's new CEO.

Yahoo shares jumped 3.6% to $15.99 minutes after the opening bell. Here's a roundup of Wall Street's reaction to Yang's departure and what impact it'll have for Yahoo shareholders.

Daniel Salmon, BMO Capital Markets: While changes at the board were not surprising, the resignation of the Yahoo!'s co-founder comes abruptly. We believe the most important near-term impact is a much lower likelihood of an extended proxy fight. It also creates the opportunity for new CEO Scott Thompson to better establish his operating culture. Investor questions about meaningful board change have been answered to a large extent, but more changes are likely to come; nominations for directors can be submitted until late February.

Jordan Rohan, Stifel Nicolaus: From a shareholder perspective, we believe this resignation increases the chances of an outright sale of the company, even if it happens in two stages, with the cash-rich split-off of Asian assets first. While this step may be seen as a positive, we believe a complete re-composition of the board may be underway and expect additional changes.

Justin Post, Bank of America Merrill Lunch: Co-founder Jerry Yang announced his resignation from the Boards of Yahoo! Inc, Alibaba Group, and Yahoo! Japan effective immediately. Consistent with the modestly positive aftermarket reaction, we view Mr. Yang's departure as a positive given that he was likely the biggest impediment to a sale of Yahoo (either the entire company or some of its assets)…With the departure of Carol Bartz and now Jerry Yang, it appears that the board is realizing the status quo isn't good enough. The Yahoo board has been under increasing scrutiny given share losses and stock performance since the Microsoft bid and it seems shareholder returns are becoming more paramount. Given recent trends, in our view it is possible that long time Chairman Roy Bostock could be next.

Heath Terry, Goldman Sachs: The effort to turn around Yahoo!'s core consumer internet business will be far more challenging, in our view. The company continues to lose traffic share in many of its most profitable segments, talent departures are ongoing, and Yahoo! lags behind in all of the major growth areas of the internet. While new CEO Scott Thompson is likely among the best options Yahoo! had, in the near to medium term we believe the structural and secular headwinds the company faces are too severe to overcome…While this news moves Yahoo! one step closer to realizing some value from its balance sheet assets, we believe the value shareholders will actually see is more than reflected in the share price once the structure of a deal is set, operating assets for the spinoff purchased, any relevant taxes paid, cash repatriated, and either returned to shareholders or reinvested in the business. Therefore, we are maintaining our sell rating relative to the broader internet sector.

(Published by WSJ - January 18, 2012)

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