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Yahoo React: Analysts Expect Board To Get Aggressive On MSFT, AOL Deal

imageYahoo’s stock had another down day — its last trade dropped $0.19 to close at $10.63 — but it could have a nice lift as word of Jerry Yang’s decision to step down as CEO takes hold. In the meantime, analysts following Yahoo (NSDQ: YHOO) shared their reaction in quick notes sent to investors and in press interviews:

CEO will come from outside: UBS analyst Ben Schachter looks at the list of possible successors and concludes that the company’s board will go outside. In particular, Yahoo president Sue Decker is unlikely to be selected for the top job because she doesn’t represent significant enough change by investors. Yang’s departure as CEO — he’ll revert to his role as “Chief Yahoo” and will retain his board seat — could also spur other board members to pursue “a more meaningful restructuring of YHOO.” Finally, expect the volume of the never-ending talk of a Microsoft (NSDQ: MSFT) deal to rise. Schachter adds: “We still believe MSFT will eventually own YHOO.” Even if a takeover doesn’t happen, the potential for news around restructurings, tie-ups with some combo of News Corp. (NYSE: NWS), Time Warner/AOL (NYSE: TWX), Google (NSDQ: GOOG) and others “could be catalysts for shares.”

Yang won’t stick around: Like Schachter, Bernstein Research’s Jeff Lindsay applauds the move as “positive development.” He also suggests that the board will actively try to pull Microsoft back to the deal table. Aside from that, Lindsay doubts that Yang will hang on to the role of Chief Yahoo very long. His resignation will signal a wider shift in Yahoo’s power structure that will leave him with little room to act in any meaningful way. More analyst react after the jump.

Jerry = Roadblock to MSFT deal: Because Yang refused to budge from his demand that Microsoft pay $37 per share to acquire it, RBC Capital Markets analyst Ross Sandler told Reuters that a major impediment to the deal is now gone. Collins Stewart analyst Sandeep Aggarwal told Businessweek: “By not having Yang as CEO, Yahoo can free up its strategic alternatives.”

Bad casting: In the end, bringing Yang in to replace Terry Semel in June 2007 after Yahoo’s poor performance was a mistake of bad casting, Martin Pyykkonen, an analyst at Wunderlich Securities, told Reuters: “He’s much better off running strategy or technology behind the scenes. … Because he’s stepping down doesn’t mean the company is going to magically be wonderful again.”