Yahoo to undergo major Reorganization; Top Executives leave

GDO Report

The report added that Yahoo executives are discussing plans to consolidate its mail, search and homepage divisions into a global product organization. Pursuant to this, the report also stated that Yahoo President Susan Decker was keen to improve communication and coordination between Yahoo's product teams and overseas sales groups.

The Sunnyvale-based company said that the reorganization plans picked up this week on the back of reports of Executive Vice President of Yahoo's Network Division Jeff Weiner leaving the company.

The company already lost three other prominent executives in the past week, Executive Vice Presidents Usama Fayyad; and the creators of Yahoo's Flickr photo sharing service, Stewart Butterfield and Caterina Fake. The concerns regarding their replacements have fanned the reorganization plan. Some more executives affected by the proposed restructuring are planning to leave.

According to reports published Thursday by two blogs, three more executives have decided to jump ship. The reports were based on unnamed people with knowledge of the departures.

The latest defectors reportedly are: Executive Vice President Qi Lu, who is in charge of Yahoo's search and advertising technology, Senior Vice President Brad Garlinghouse, who oversees communications tools like mail, and Vish Makhijani, a senior vice president involved in search.

The exodus could worsen Yahoo's instability as Yang and his remaining lieutenants scramble to regain their bearings after spending five months grappling with an hostile takeover bid from Microsoft.

The company reportedly noted that early details on the reorganization could be announced as soon as next week.

Yahoo said in a statement said, "We have a deep and talented management team across all areas of the company. Our successful implementation of our core strategies and the timely rollout of key products this year testifies to the effectiveness of our team, and we continue to recruit outstanding talent."

Yahoo is currently under intense pressure to devise a strategy to increase earnings and prove that the company is worth more than what Microsoft was willing to pay to acquire it. Last Thursday, Yahoo reached a non-exclusive search advertisement agreement with Google that will enhance its ability to compete in the converging search and display marketplace and to achieve its goal to grow operating cash flow significantly.

Microsoft first approached Yahoo in early February with a $31 a share offer, which at that time valued Yahoo at $44.6 billion. The offer represented a 62% premium to Yahoo's closing stock price of $19.18 on Jan. 31. Though Microsoft Chief Executive Officer Steve Ballmer called the offer price 'quite generous', Yahoo, deemed the offer far below the company's value.

Ballmer had later suggested $33 per share for Yahoo, representing about $47.5 billion, for the Internet search engine company. However, Yahoo's board wanted an offer of $37 per share, even though the company's stock had not reached that level in more than two years.

After over three months of unfruitful negotiations, Microsoft lost patience with Yahoo. Following a series of discussions with Yahoo, Microsoft had announced on May 3 that it has withdrawn its proposal to acquire Yahoo after the two parties failed to reach a consensus on the acquisition price.

Pursuant to Yahoo's disappointing handling of the Microsoft's acquisition offer, billionaire activist investor Carl Icahn and some major sharehoders intend to oust the company's nine-board in the postponed shareholder meeting for electing members to the board on August 1.

In the event that the Icahn nominees are elected to the board, it would give him the ability to remove Yahoo Chief Executive Officer Jerry Yang from his position. Icahn has already aired his intention to hire a talented and experienced chief executive officer to replicate the Google Inc. (GOOG: News, Chart, Quote ) success with Eric Schmidt as well as return Jerry Yang to his role as "Chief Yahoo".

YHOO closed Thursday's regular trading session at $22.73, down $0.18 or 0.79% on a volume of 19.01 million shares, sharply lower than the three-month average volume of 40.09 million shares.