Jerry Yang has finally figured out there's life beyond Yahoo Inc. (Nasdaq: YHOO). The co-founder and chief Yahoo of the search engine provider quit his positions at the company on Tuesday and said he would be pursuing "other interests outside of Yahoo," according to a news report.
Yang should have taken this step four years ago when Microsoft Corp. (Nasdaq: MSFT) made a hostile $44.6 billion bid for the company in 2008. That offer was a "62 percent premium above the closing price of Yahoo! Common stock," the day before the offer on January 31, 2008, Microsoft said in a press statement at the time. As I have pointed out in a previous blog, Yang should have taken the offer, but Yahoo was his baby and the co-founder didn't know how to let go. He didn't seem to understand then that his life was not entirely wrapped up in Yahoo and that he could do and enjoy doing something else. (See: RIM, Yahoo: Knowing When to Fold or Hold.)
Yang's refusal to agree to the sale of Yahoo to Microsoft four years ago shouldn't stop us from acknowledging his contributions to the company or the technology industry. He and David Filo, a college friend, started Yahoo in 1994, and the company grew into a phenomenal enterprise that enabled millions make sense of the Internet. As doctoral students at Stanford University, Yang and Filo understood the Internet would come to play a major role in human activities and offered fledgling users a way to make sense of the tangled mess of the Web.
Yahoo blazed the trail for other search engines, including Google (Nasdaq: GOOG), which now dominates the market and which was established in 1998 by Larry Page and Sergey Brin. Today, Google is the unrivaled leader in the market for Internet search, but even its dominance is under assault from new technologies that have since emerged, including social networks like Facebook (Nasdaq: FB), which don't lend themselves easily to the type of cataloguing offered by Google, Yahoo, and Microsoft.
This is one of the reasons why Yang's decision to step down from Yahoo is important for the company's future. Although it cannot rekindle Microsoft's interest (Steve Ballmer, Microsoft's CEO, has said the company was "lucky" it didn't buy the company), Yahoo, under its newly appointed CEO Scott Thompson, should be able to explore a wider range of options, including either the sale of the company or parts of its operations.
Thompson won't be encumbered by the legacies of Yahoo's past and lacks the emotional involvement with the company that hobbled Yang. That's a plus for the company and one that should benefit also the board of directors as they consider options for Yahoo's future. The company is expected to sell some of its overseas operations, including a minority stake in Alibaba.com Hong Kong Ltd. , China's biggest online marketplace, and Yahoo Japan. Yahoo's interest in Alibaba and Yahoo Japan is estimated at 40 percent and 35 percent, respectively. The money generated can be used to explore new strategic targets or fund expansions.
So far, most discussions about the future of Yahoo have centered on it being a consolidation target. But this is not the only option or even the best strategic choice for the company. True, its sales -- compared with Google's -- have stagnated at about $6.3 billion vs. $29.3 billion for the rival search engine provider. Yet Yahoo can benefit from its low debt leverage. In fact, the company has zero long-term debts and, as at the end of the September quarter, had more than $7 billion in cash and short- and long-term investments. It can easily borrow more money and look for opportunities in adjacent markets.
With Yang gone, it's time for Yahoo to go bold again. Suggestions welcome.