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Yahoo's Critical Next Moves

Is it business as usual or a company reeling from the imminent departure of its CEO?

To hear Yahoo tell it, its operations will continue normally, with Jerry Yang maintaining his CEO role until a successor is found. Yang announced his plans to cede the CEO slot late Monday in an e-mail to employees as well as in a Yahoo (NASDAQ: YHOO) press release.

The day after this news, Yahoo's shares closed up 8.65 percent Tuesday to $11.55, but the shares have been in free fall since the company rebuffed a buyout offer by Microsoft for $32 per share and, more recently, an ad revenue-sharing deal with Google (NASDAQ: GOOG) fell apart.

"Jerry's remaining as CEO until a successor is named and we're executing on our strategy," Yahoo spokesman Brad Williams told InternetNews.com. "Were proud of the progress we've made this year to strengthen the company's position as a must buy for advertisers and as a starting point for consumers and as a more open and social platform."

Williams also said the search for a new CEO has only just begun and there are no candidates scheduled for interviews. Yahoo said it's hired the executive search firm Heidrick & Struggles to help it find candidates, though it also noted internal candidates would be considered.

Dithering with Microsoft

But a slow pace for Yang's successor is not what outside observers want to hear.

"The fact is Jerry dithered with Microsoft; he was the guy in the way," said technology forecaster and analyst Paul Saffo. "Yahoo is a huge, successful property, but the hour is getting late. The question is where do the dice land after Yang? I don't think it's a foregone conclusion Microsoft comes in and gets Yahoo at a bargain price. Icahn isn't going to allow a fire sale."

Carl Icahn is the big Yahoo investor who pushed for a sale to Microsoft and was critical of Yang reluctance to pull the trigger. He's now a board member of Yahoo. After negotiations broke down, Microsoft CEO Steve Ballmer said he wasn't interested in buying Yahoo anymore. A Microsoft spokesperson said the company had no comment on whether Yang's decision changes anything or if the company has renewed interest in buying Yahoo.

Before negotiations shut down, Yahoo also rejected a lesser deal proposed by Microsoft, to buy Yahoo's search business. In a rare interview, Yang discussed his dealings with Microsoft at the recent Web 2.0 Summit. He repeated earlier claims that it was Microsoft that broke off negotiations, going so far as to say "the best thing Microsoft could do is buy Yahoo." But he also rejected the idea of selling off the search portion of Yahoo's business.

"At the end of the day it's incredibly important we compete vigorously in the search market," he said. "There is a perception we're not doing well, but we're doing better now in search than when we started talking about this deal" with Microsoft.

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