Yandex, arguably the most successful and emblematic Russian digital company over the past 25 years, could be split amid the international and domestic tensions that have followed Russia’s attack on Ukraine on Feb. 24.
Confirming earlier media reports (FT, NYT, The Bell), Yandex announced Friday it had “commenced a strategic process to review options to restructure the group’s ownership and governance in light of the current geopolitical environment.”
The company is exploring “potential scenarios and steps” to “develop the international divisions of certain services (including self-driving technologies, cloud computing, data labeling, and ed-tech) independently from Russia.”
These businesses will be run by the current mother company, Yandex N.V., registered in the Netherlands, which “will in due course be renamed.”
Such a configuration could reduce the exposure of Yandex’s international activities to western sanctions.
Meanwhile, Yandex said, “all other businesses in the Yandex Group (including search and advertising, mobility, e-commerce, food-delivery, delivery, entertainment services and others in Russia and international markets)” will be run by a new Russian company.
This entity will “retain exclusive rights for the use of the Yandex brand.”
According to media reports, the international company would be run by Yandex’s founder Arkady Volozh, while the Russian company would be controlled by its management and new Russian shareholders, including companies affiliated with pro-Kremlin oligarch Vladimir Potanin.
President Vladimir Putin reportedly approved the plan, with Alexei Kudrin, the influential former finance minister, expected to own a 5% in the future Russian company and head it.
However, the restructure is “at a preliminary stage,” Yandex stated. “There can be no assurance that these steps, including identifying buyers for stakes in the business to be divested, will be successfully identified and implemented,” and ultimately approved by shareholders.
A tech jewel hit by tanks
Yandex, which went public on the Nasdaq back in 2011, was hit by Russia’s war on Ukraine almost instantly:
- On Feb. 28, after the stocks of Russian tech companies, including Yandex, fell sharply, Nasdaq stopped trading them due to regulatory concerns.
- In mid-March, Yandex announced it was exploring different “strategic options, including disvestment” for a range of its assets.
- Soon afterwards, the company’s delivery and mobility activities were stopped or threatened in the US, UK, France, Latvia, Estonia.
- In March and June, respectively, the company’s deputy CEO Tigran Khudaverdyan and its founder Arkady Volozh were sanctioned by the European Union.
- In April, to avoid a default, Yandex scaled back many planned investments and withdrew its financial guidance for the year.
- In August, Yandex did sell its news service and homepage to its archrival VK Company — which is even more under Kremlin control than Yandex itself.
- By the summer, compromises with the authorities led the company into a trap. Yandex was divided internally, as “some top managers left the country and are trying to salvage what they can from abroad; while others remain in Moscow and are determined to save Yandex’s Russian business,” the local media reported.
- Amid these events, a significant fraction of the 19,000 staff left the company or were moved to such other countries as Serbia or Uzbekistan. By August, over 10% of the employees had left, reported Bloomberg.
No good tech business from Russia?
Yandex is not the only major Russian or Russian-founded tech company leaving Russia, fully or in part, or seeking to do so amid domestic and international political pressure. Recent examples include inDriver (rebranded to InDrive), Playrix, Nexters and Tinkoff, to name just a few.
Some tech companies left Russia a long time ago. Game Insight and Luxoft moved to their headquarters to other countries of Eastern Europe in 2014, as Russia’s annexation of Crimea began generating tensions with western powers.
Kaspersky Labs is another famous, but little successful example. The cybersecurity provider aimed to be “be more American than the Americans” when, back in 2013, it opened a new US office in the Washington D.C. area to sell its products to the US government. In spite of these efforts, however, the company never ceased to be regarded with suspicions by may western governments, partners and consumers.
This article was updated on Nov. 26 in light of the latest company announcement and media reports.
