Yang departure reopens door for Microsoft

And rival digital media owners think that Yang's impending departure has left an open door for Microsoft to make another bid for the business - following its failed approaches this year - with observers suggesting Microsoft may come back with a new bid in the next three or four months.

A senior executive at a rival digital media owner said: "I'd say Microsoft will be licking its lips over Yahoo now that Yang is to resign, especially since he was arguably the main stumbling block in the original deal. It may even have been a key factor in his decision to step down."

Oliver Bishop, chief executive of digital agency Steak Media, said: "It will take time to make Yahoo strong again - and this may be the opportunity Microsoft or another suitor has been waiting for to make an offer, when the shares are low and the leadership is in flux."

Rumours abound regarding the identity of Yang's replacement. Potential candidates will be evaluated by Yahoo chairman Roy Bostock, along with the independent board directors and Yang himself. Senior analysts in the US have urged the company to move quickly to find a new leader, and Peter Chernin, president and chief operating officer of News Corporation is leading the race to replace Yang, according to a multitude of online reports.

Former eBay chief executive Meg Whitman, former AOL chief executive Jonathan Miller, Kevin Johnson, the former head of Microsoft's online division, and Google's top ad exec Tim Armstrong have also been tipped for the shortlist.

Although it seemed to be more a question of when rather than if Yang would step down, it is not all doom and gloom for Yahoo. Bishop said: "Yang's departure isn't surprising given the events around Yahoo, Microsoft and Google over the past months. But Yahoo still owns web properties with solid user bases - not to mention its strong display inventory and assets like BlueLithium, plus new products like Yahoo Direct Response. And let's not forget that Yang built up a company which Microsoft was willing to offer $44.6bn (£29.6bn) for only a short time ago, and that it consistently ranks high in terms of brand awareness and customer loyalty."

Yang will continue as a member of the board and will revert to his previous role as an advisory position Chief Yahoo. In a memo to Yahoo staff on Monday, Yang stated his continued love for the company he co-founded, saying: "I have always and will always bleed purple [the colour of Yahoo's livery]."