A couple of days ago the now slightly infamous Yahoo CEO, Jerry Yang, announced he would be stepping down from his position once a suitable replacement has been found. Yang has only been in the job for just over 18 months and undoubtedly his tenure of the post will be remembered for only one thing - his rejection of a takeover bid valued at around $44bn from Microsoft back in early 2008. The obvious question now is - will this change fuel renewed takeover speculation and offers?

Well the simple fact is that despite a recent bounce Yahoo shares currently sit at $11, well below the $31 that Microsoft was offering back in February. Many then accused Yang of acting contrary to the interests of shareholders and being governed by his ego - though this is almost certainly quite harsh (but perhaps understandable coming from angry shareholders). However the point is that if Yang had a different idea about where the company should be going back then, why is he now leaving its leading post and what chance is there of his vision being realised if he is now only ‘chief Yahoo’ and a board member?

There is of course speculation that Yang has been prompted to the demotion and that the move is the most PR friendly, damage-limiting, way of ‘firing’ Yang (the old ‘mutual consent’ situation which is becoming increasingly popular these days). For the time being it is impossible to tell, though one thing is for sure: if Yang had been more drastically removed then the move would have served as a direct courting invitation to potential takeovers. As it is thay are being a little more coy, leaving a bit of a grey area in terms of evaluating the chances of such a development.

It seems unlikely that Microsoft will risk the serious loss of face that would arise if it were to be once again rejected in a takeover bid - this time by Yang’s successor presumably. Therefore I can only really see MS giving it another go if they were sure of success this time around. It must be remembered however that a good few other potential suitors are out there, and for them a first attempt might be more worth the PR gamble.

Assuming an offer is made, the real issue will be whether Yang’s replacement would have the will and certainty of conviction to refuse yet another offer, the lure of which would now be far stronger. Bearing in mind the share-price tumble since February, and the general shareholder discontent with Yang’s decision, it would be difficult indeed, as a new CEO, to turn down £22-a-share for example. The question is no longer really of what is right for the company, because it seems likely that if a bid is made then it will be overwhelmingly impossible to refuse.

Anyway as all eyes await the identity of the new CEO, we are left with one certainty, that; if Microsoft does put in a succesful bid for Yahoo in the coming months it will surely cost them a good deal less than the $44 bn they would have paid in February but for Yang. Though currently sidestepping the issue, we all know Steve Ballmer and co at MS must be absolutely loving the way things have turned out…

Dejan Levi
www.etondigital.com