Jerry Yang is leaving Yahoo!, sending shares higher, but I blame Chairman Roy Bostock and other directors like Ron Burkle, Eric Hippeau, and Gary Wilson for the current sad state of affairs at the company rather than Yang. After all, this is largely still Terry Semel’s hand-picked board. These directors all decided last year that Jerry Yang was the most qualified candidate for the job. They also have considerably more deal-making experience than he does, so you can only hope that they were directly involved in the Microsoft talks—whispering in Jerry’s ear, “’not a penny under $40,’ just keep saying that to Ballmer; that’s how you play this game...”
These wise men (and one woman) will now pick the next CEO. Kara Swisher and Henry Blodget have already floated the names of some potential successors. Here’s my view of the top candidates to take over the Yahoo! CEO role:
1. Steve Ballmer. The best outcome for Yahoo! shareholders of course would be if the new search committee never selected a CEO. This company should use this change in leadership to go back and open discussions with Microsoft about selling the company. This made sense when Microsoft made its initial offer last January at $31 and it makes sense (triply so) now.
2. Peter Chernin. An ideal candidate who likely wants to spread his wings without Rupert looking over his shoulder any longer. Although News Corp.’s stock price has dropped precipitously over the last three months, it’s still a safer bet than Yahoo! Chernin probably would have considered moving last year, but not now.
3. Jonathan Miller. Great relevant experience and well-liked by his staff and peers despite being unceremoniously dumped out of his former role heading up AOL. Miller recently set up a new venture fund called Velocity Interactive Group with Ross Levinsohn (ex-head of Fox Interactive Group). Icahn tried to draft him many times over the summer to take the top spot. Miller declined, as he didn’t want to turn his back on his new venture and his investors. He is also not likely to take the job, if asked.
4. Ross Levinsohn. See the Miller description above. Levinsohn would be a solid choice but unlikely to leave his current gig.
5. Tim Armstrong. The revenue head at Google has relevant experience and is likely ready to take a CEO role. Even though Google has struggled in this recession like everyone else, it still has much more upside than Yahoo! It would be tough for Armstrong to turn his back on that safety.
I favor an outsider taking the reins at Yahoo!—preferably someone who has enough experience and reputational capital that he or she can insist on reshaping the board, as well as the rest of the company. Yahoo!’s board is still very much the board Terry Semel hand-picked and is in desperate need of a refresh.
An insider CEO, or someone coming from the current board, would most certainly keep the company on its current trajectory, which is the slow boat to China. For that reason, Yahoo! President Sue Decker or board member Maggie Wilderotter would be poor choices. Meg Whitman defines “big company Internet CEO” but her last few years, marked by questionable acquisitions, and eBay’s subsequent performance have diminished her luster as a candidate.
This board will be under intense scrutiny from the media but also its largest shareholders. I hope that people like Gordy Crawford of Capital Research and Mark Casey of Capital World will be heavily involved in the deliberation discussions to keep the current board members in check.
The Yahoo! board likely wants to make the “safe” choice of a big company/Internet experience/former CEO/outsider. Peter Chernin fits the bill. Miller, Levinsohn, Armstrong, and Whitman would all be good choices. However, I expect none of them to be interested.
So, the last man standing to take the Yahoo! CEO job will be a woman: Sue Decker. She has too much baggage to be an acceptable selection for a majority of Yahoo! shareholders, but such concerns haven’t stopped this board before.
[Disclosure: Jackson’s fund owns no MSFT, GOOG, or YHOO, although it has a short position in NWS. Jackson still personally holds a small long position in YHOO.]
Eric Jackson is founder and president of Ironfire Capital, LLC, and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. A dissident shareholder at Yahoo, he sold his fund's shares in September.