What's Yahoo's next move?

Yahoo chief executive and co-founder Jerry Yang announced Monday that he will resign from his position as soon as the company appoints a replacement for him. After a tumultuous year at the forefront of one of Web's prolific companies, Yang will return to his previous role directing Yahoo's global strategy. But the question is where will troubled Internet company go now?

Yahoo has repeatedly denied during recent weeks that Yang, 40, was about to be replaced. But following a Yahoo board meeting on Monday, Yang's fellow directors agreed to accept his resignation from the chief executive job.

[ In other IT business news this week, Symantec's John Thompson announced he is retiring. And get sage advice on IT careers and management from Bob Lewis in InfoWorld's Advice Line blog and newsletter. ]

The final blow

Yang failed to bring either a viable merger partner or a strong revenue-generating deal in his 18 months as Yahoo CEO, so his resignation didn't come as much of a surprise.

Earlier this year, Yahoo failed to agree an acquisition by Microsoft and Yang looked into a search advertising partnership with Google. However, Google pulled out of the deal as federal antitrust regulators threatened legal action.

With Google out of the game, Yahoo was left in the cold and Yang turned back to Microsoft at the beginning of this month for another buyout. But unlike earlier this year, Microsoft was not interested anymore.

In the light of these events, Yahoo's shares plummeted this year from over $33 per share this spring when Microsoft was attempting a buyout, to $13 per share earlier this month when Yahoo's deal with Google went down. After Yang's resignation announcement yesterday, Yahoo's shares fell again to just $10.63 per share.

Yahoo without walls

The direction Yahoo is going to take once a new CEO is appointed is uncertain yet as the company shifted during Yang's reign from search to a more service-portal provider, with advertising revenue at its core.

And with Yang stepping down and Yahoo's share prices at a record low, Microsoft could be up for a real bargain. That is a $14.7 billion bargain, which is Yahoo's valuation after the price drop in shares yesterday, in comparison to the $44.6 billion Microsoft offered this spring.

However, Microsoft has not reiterated its thoughts on placing another bid for troubled Yahoo. But given Yahoo's distant second-place ranking in the search market, a Microsoft buyout would make sense, as the two companies could combine their user base, tightening up the gap between Google and them.

PC World is an InfoWorld affiliate.