Yahoo! has to decide its course, then pick a chief

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: There’s a new parlour game in Silicon Valley: guessing who will replace Jerry Yang at the helm of the troubled Internet giant Yahoo!.

Yang, a Yahoo! co-founder, said he would relinquish the chief executive role once a successor is named and revert back to being “chief Yahoo!”, the strategy position he held before his 18 turbulent months running the company.

But even before its new boss is selected, Yahoo! has an even more fundamental decision to make, say analysts. Does it want to remain an independent company, trying to grow in a range of businesses while it combats Google in the crucial arena of Web search? Or should it finally listen to the devotees of deal-making and sell some or all of itself to another player, most likely Microsoft?

Steven A Ballmer, Microsoft’s chief executive, has said he has no interest in making another bid for Yahoo!, but he has expressed repeated interest in buying the company’s search business. Observers and Internet veterans agree that this remains the company’s most attractive option.

“Yahoo! is still in many ways the definitive brand of the consumer Internet, but I don’t think they can or should compete with Google any longer,” said Ross Levinsohn, the former president of Fox Interactive Media. “That game is over.” If the Yahoo! board agrees, it will want an experienced chief executive with a history of deal-making who is also capable of running the online media properties that are left behind.

Potential candidates who could embrace this vision of Yahoo! include Peter Chernin, the president of the News Corp; Jonathan F Miller, the former chief executive of AOL; and John Chapple, president of Hawkeye Investments, who was listed on the activist investor Carl C Icahn’s alternative slate of Yahoo! directors during a proxy battle last summer.

But some observers think Yahoo!’s board could forgo any kind of deal with Microsoft and select a leader who stabilises the company, unifies its employees and tries to capitalise on its broad technological assets. Candidates that fit with this strategy include Marc Andreessen, the co-founder of Netscape, and Jeff Jordan, a former eBay executive who runs the online reservations start-up OpenTable.