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Yahoo Reorg Rumored as Executives Jump Ship

Yahoo exodus

Embattled Web pioneer Yahoo (NASDAQ: YHOO) may be planning a major internal restructuring as it faces an executive exodus and a looming battle for control of the company.

Details of a plan to consolidate various product groups and streamline Yahoo's domestic and international operations could emerge as early as next week, according to a report in The Wall Street Journal, citing people familiar with the company.

A Yahoo spokeswoman was unable to immediately confirm details of the reorganization or recent departures.

The wave of departures comes as Yahoo is trying to convince its shareholders that it is on the right track. Activist investor Carl Icahn is still pursuing his proxy fight to take control of the company's board at its annual meeting Aug. 1.

Yahoo has garnered plenty of attention in the tech world this past week. Last Thursday, the company announced that acquisition talks with Microsoft (NASDAQ: MSFT) had ended and that it had inked a search-advertising deal with Google (NASDAQ: GOOG).

Earlier this week CEO Jerry Yang was in Washington meeting with lawmakers about concerns they had raised about the deal. President Sue Decker was the driving force behind the planned restructuring, according to the Journal report.

Under the plan, Yahoo would create a central, global product unit comprising divisions such as e-mail, search and the home page.

Yahoo will face a thinning talent pool in any reorganization it undertakes. With the resignation of Jeff Weiner and the reported exit of Usama Fayyad, Yahoo lost two executive vice presidents since announcing the deal with Google.

Longtime developer Jeremy Zawodny also turned in his badge and said yesterday that he would begin work as an engineer with Craigslist in July.

Now, rumors are bubbling that three more prominent Yahoo employees -- Qi Lu, Brad Garlinghouse and Vish Makhijani -- might be on their way out.

Lu serves as executive vice president of Yahoo's search and advertising technology group. Garlinghouse runs Yahoo's e-mail and instant messaging products, and Makhijani serves as general manager of Yahoo's Web search business.

They would join Flickr co-founders Stewart Butterfield and Caterina Fake, who have both said they are leaving the company.

"We think a restructuring is [in] the offing and that morale is likely relatively low," Scott Kessler, an equity analyst with Standard and Poor's, wrote today in a research note. "With human capital historically having been one of Yahoo's greatest assets, we see these developments as a material negative."

Yahoo shares closed down 3.26 percent following the reports of departures and restructuring.