Yahoo! CEO Jerry Yang declines to speak to a reporter at the 26th annual Allen & Co conference in Sun Valley, Idaho July 10, 2008. (Xinhua/Reuters Photo)

Yahoo! Inc said yesterday that Jerry Yang would step down as chief executive officer as soon as the board found a replacement, sending shares soaring on hopes the departure would clear the way for a deal with Microsoft Corp.

Yahoo stocks rose as much as 13 percent in Nasdaq trading early yesterday on the back of the news, their largest gain in a month.

Yahoo, based in Sunnyvale, California, climbed US$1.38 to US$12.01 at 9:30am in New York trading on the Nasdaq Stock Market.

The shares were down nearly 65 percent from their 52-week high of US$30.25, reached in February, two weeks after Microsoft made its US$31-a-share offer public.

Yang, who will return to his former role at Chief Yahoo, head of strategy and technology, tried to carve an independent strategy for the company and was blamed when Microsoft walked away from an offer to buy the group earlier this year.

Google also abandoned a search-advertising partnership amid regulatory concerns, and Yang faced criticism from investors and analysts as Yahoo's shares plummeted.

Yahoo's months-long discussions with Time Warner Inc about combining with its AOL unit have also failed to produce a deal.

"The company is in desperate need of change and this is clearly one way to do it," said Ross Sandler, an analyst at RBC Capital Markets, adding that Microsoft could re-enter the picture. "Jerry was the roadblock for the last deal getting done."

Microsoft officials yesterday declined to comment.

Yang has often said he would sell at the right price. Microsoft withdrew its US$47.5 billion bid in May after the sweetened offer was rejected.

Yang, a co-founder of Yahoo, took on the CEO role in June 2007, hoping to strengthen its position as an online consumer brand.

"From founding this company to guiding its growth into a trusted global brand that is indispensable to millions of people, I have always sought to do what is best for our franchise," Yang said in a statement.

In an e-mail sent to employees and obtained by Reuters, Yang said his decision to step down was taken jointly with Yahoo's board.

Yang has been talking with the board about stepping down since before Google pulled out of the search deal in early November.

Yahoo Chairman Roy Bostock was leading the effort to find a replacement, said Yang.

"Jerry was miscast in this CEO role," said Martin Pyykkonen, an analyst at Global Crown Capital. "He's much better off running strategy or technology behind the scenes."

Pyykkonen said it was a step in the right direction for Yahoo but had a word of warning. "Because he's stepping down doesn't mean the company is going to magically be wonderful again," he said.

Yahoo has hired executive search firm Heidrick & Struggles to look at internal and external candidates.

The process could take between four weeks and 12 weeks.

Editor: Yan