Jerry Yang’s decision to resign as chief executive officer of Yahoo has not only set off a frenzied search for his successor – it has also increased the likelihood that the search engine giant will be acquired by Microsoft.
Yahoo shares, currently trading at $11.55, could double in worth if a new CEO can restart negotiations with Microsoft, according to analysts.
"The strategic necessity here is for this company to merge with Microsoft," Larry Haverty, a fund manager at Gamco Investors Inc. in Rye, N.Y., told Bloomberg News. "This is just unmitigated good news for the Yahoo shareholders."
Nonetheless, Yahoo will have to swallow it pride during possible negations. It won’t be seeing a deal anywhere in the ballpark of the $47.5 offer it received from Microsoft nearly seven months ago.
Microsoft, set on competing with Google in the Internet search market, has expressed interest in talks with Yahoo, but has stated that it is not interested in buying the entire company.
Possible successors to Yang include News Corp. President Peter Chernin, Kevin Johnson, a former Microsoft exec who helped engineer the initial bid for Yahoo, and Yahoo President Sue Decker. Also mentioned as candidates are former eBay Inc. CEO Meg Whitman and Jonathan Miller, the former CEO of AOL.
The new CEO’s contract should have many pay incentives, analysts say, and should include change of control terms, in case Yahoo is acquired rapidly. The package should be “a mixture of cash and equity,” Edward Deibert of the law firm Howard Rice Nemerovski Canady Falk & Rabkin, told Forbes.
"The company is trading at such an all-time low, the equity could turn out to be quite valuable,” he added.