Yahoo co-founder Yang quits

Yahoo Inc co-founder Jerry Yang has quit the company he started in 1995, appeasing shareholders who had blasted the Internet pioneer for pursuing an ineffective personal vision and impeding investment deals that could have transformed the struggling company.

Yang's abrupt departure comes two weeks after Yahoo appointed Scott Thompson its new chief executive, with a mandate to return the once-leading Internet portal to the heights it enjoyed in the 1990s.

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Wall Street views the exit of "Chief Yahoo" Yang as smoothing the way for a major infusion of cash from private equity, or a deal to sell off much of its 40 per cent slice of China's Alibaba, unlocking value for shareholders.

Shares of Yahoo gained three per cent in after-hours trade.

"Everyone is going to assume this means a deal is more likely with the Asia counterparts," Macquarie analyst Ben Schacter said. "The perception among shareholders was Jerry was more focused on trying to rebuild Yahoo than necessarily on maximizing near-term shareholder value.

"It certainly seems things are coming to a head as far as realizing the value of these assets."

Yang, who is severing all formal ties with the company by resigning all positions including his seat on the board of directors, has come under fire for his handling of company affairs dating back to an aborted sale to Microsoft in 2008.

Yang's exit comes roughly a month before dissident shareholders can nominate rival directors to Yahoo's board.