“This can not be true, can it?” said one of the Yandex commissioners during a hastily planned crisis meeting via Zoom. It is Friday, February 25, a day after the Russian invasion of Ukraine. The commissioners, seven Russian, American and Dutch businessmen, are in a panic. “The mood was: good heavens, what’s going to happen to our tent?”, One of them sums up the feeling.
In the following weeks, Russia’s most successful technology company sees the earth crumble under its feet. In a short time, three Yandex board members resign and 1,500 Russian employees flee the country. New York stock exchanges suspend trading in shares of Russian companies. The price of Yandex plummets, from $ 82 (November 2021) to just $ 19 (17 euros).
Yandex is in acute financial trouble and is trying to sell parts. The US IPO is collateral for bond loans, which keeps the company afloat. But the closure entitles bondholders to immediately demand the $ 1.25 billion loan for the loans. Yandex does not have that many dollars.
One week before the invasion, on February 17, the world looks very different to Yandex. Founder Arkady Volozh, 58, and his board members meet at Yandex headquarters in the Chamovniki district of central Moscow. This is the first time since the corona crisis that management has met there. Only board chairman John Boynton has to sign in via a video link due to corona.
No emergency scenario
For two days, they make plans with the local management team. International expansions are on the agenda for the taxi service that Yandex operates with Uber. The company is also looking for new markets for the flash delivery companies that the Russian internet company under the name Yango Deli already started in London and Paris.
Top executives are hardly aware of the tensions in Ukraine. Putin, say the Yandex directors and board members to each other, he would not be so crazy that he really started a war, right?
Then the invasion of Ukraine on February 24 puts an end to international ambitions. Yandex, which for tax reasons has its formal office on the sixth floor of Tower A in the World Trade Center at Schiphol, has no emergency scenario in place that prevents the company from being entangled between interests in the East and the West.
The icon of the Russian technology world, according to the talks there NRC carried out this week with six current and former employees of Yandex, is looking for a plan B.
Two Russian whiz children
Yandex was founded in 1997 by Soviet-born Kazakhstan his children Arkady Volozh and Ilya Segalovich, both from highly educated Russian families of geologists and musicians. They meet at a prestigious mathematics institute in Almaty. In Moscow, they mess with algorithms and develop a search engine to search the Bible. In 1993, they invented Yandex, which stands for another index. Segalovich dies in 2013 at the age of 49, Volozh continues alone.
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In twenty years, Yandex has grown into the largest and most powerful technology company in the country and the fifth largest search engine in the world. Yandex is an online directory, but also an online store, a speed camera delivery service, a pioneer in self-driving vehicles, a taxi service, software developer and cloud service provider. In short: Google, Amazon, Uber, Waymo, Spotify and Apple Pay under one brand. It is Big Tech in Russia with 18,000 employees and an annual turnover of about 6 billion euros.
With all these different services, Yandex has made itself indispensable for modern Russians. Thanks to Yandex.Taxi yellow taxis, Russians move quickly, safely and cheaply in hundreds of Russian cities. The yellow-packed meal couriers from Yandex.Eda and their courier colleagues from Yandex.Go deliver groceries to the Russians’ doorstep. The company is active in almost all former Soviet countries, in Serbia and the Baltic countries. In Israel, Norway, Finland, Ivory Coast and Ghana, the taxi arm operates under the name Yango.
The company is developing technology for self-driving cars, which is also being tested in the USA and Israel outside Russia. Since 2019, dozens of state-of-the-art robot trucks from Yandex.Rover have been driving around the Moscow district of Chamovniki. These electrically powered carts collide across the sidewalk and crossings to deliver groceries. With their 360-degree rotating cameras, the robbers scan the area to avoid collisions with lampposts and pedestrians. Self Driving Group has international potential: it is now an independent part of Yandex – again registered in the Netherlands.
As the war breaks out in late February, Yandex will not shut down immediately. The technology company is not on the sanctions list, but operational chief Tigran Choedaverdja is yet to resign. He is considered in Putin’s circle because he represented Yandex when he was to perform with dozens of Russian entrepreneurs for an audience with the president.
Two U.S. board members are leaving on their own initiative: Esther Dyson, a former technology journalist who joined Yandex in 2006, and Ilya Strebulaev, a professor at Stanford University in Silicon Valley. Three US directors for MLU, a joint venture between Yandex and Uber, are also resigning.
Dutch board member Rogier Rijnja remains. He struggles with his responsibilities, but sees it as his job, along with two remaining U.S. board members, to free Yandex from an economic stalemate.
If the tech exchange Nasdaq freezes trading in Yandex, an emergency measure will take effect on the outstanding bonds. Yandex is to repay $ 1.25 billion, but the Russian government is not allowed to transfer funds to the West.
At the beginning of March, Yandex still had a war chest of $ 615 million, of which $ 370 million is in accounts outside Russia. Enough to last a year, according to the company. To generate more money to pay back to bondholders, Yandex is trying to divest parts – the Yango Deli flash delivery services in London and Paris are now for sale. The company must be careful in this regard. Any proposed trading should be discussed with the bondholders. After all, they want the value of Yandex, on which their debt securities are based, not to fall further.
It is impossible to divide Yandex into an international and a Russian part. The foreign parts do not generate enough money. “The company’s center of gravity is in Russia,” says one person involved. “If we split the company, Yandex would bite its own leg off like a hyena in a trap.”
In addition, people in Yandex are afraid that the company will still be put on the sanctions list in the growing conflict between East and West. It is already noticeable; since Yandex is Russian, it is suspicious in advance. No one in Europe wants to use a service from Russia, so Yandex no longer allows its speed cameras to be deployed in Paris and London.
Modern and progressive
Russia will be banned, so Russian technology will also be banned. Suddenly, Yandex is lumped together with Putin. To the great frustration of the tech company, which has always deliberately wanted to stay out of any political interference.
Yandex’s headquarters in Moscow are strikingly similar to those of technology companies in Europe or Silicon Valley. A cheerful decor: lounge chairs everywhere, plants on the walls, each floor of Yandex has its own color. The employees are modern and progressive. Supporters of the Putin regime are hard to find on Yandex.
The company has a bit of a hierarchy, writes the Russian journalist Dmitri Sokolov-Mitrich in his company biography Yandex.Kniga, which is distributed free of charge by Yandex. The work culture of the company differs in everything from the traditional top-down, power- and influence-oriented approach of many Russian companies. Instead, independence and creativity are nurtured, and too much government influence is kept out.
Employees who prefer not to have their last name listed for fear of their or their family’s safety say that it is normal for Yandex to contradict managers. Top man Volozj does a round of questions with the staff every Friday at noon, where everyone can ask the top man anything. “Very unusual in Russia,” says a Yandex search engine employee via the chat service Telegram. “We can ask about anything and get an honest answer.”
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The war has left workers “shocked and confused,” said IT employee Tanya, who works for Yandex. “We did not think about anything else for the first few days. Now we are trying to regroup and complete projects. ” Anyone who wants to can work from home, and Yandex has paid employees an extra monthly salary to offset rising prices due to Western sanctions. With weekly updates from the management team, Yandex tries to keep staff motivated.
Yandex is trying to survive without antagonizing the Kremlin. The relationship between Yandex and the Kremlin is complex. Another Russian internet company, Telegram, left Russia because it did not want to comply with censorship laws. Yandex chose to stay in Russia and it has consequences. If you search on Yandex.ru, you can still read foreign reports in Russia. But Lev Gershenzon, former Yandex news director, told Financial Times that Yandex’s news filter is designed to favor messages that are favorable to the Kremlin. Yandex now wants to divest this news service, Zen. They do not want to cooperate with the Russian propaganda machine.
The success of Yandex has already attracted the attention of the Kremlin, who feared that one day a foreign investor would run away with knowledge and Russian user data. In 2019, Volozh agreed to set up a special Kremlin-controlled fund with far-reaching powers within Yandex, such as blocking transactions and suspending management. To reassure employees and foreign investors, Yandex was allowed to remain active in international markets, Volozh retained control of management and remained the major shareholder.
That basis of protection is a balancing act. The construction aims to assure Western investors that Yandex is not directly under the Kremlin’s control, while at the same time convincing the Kremlin that Yandex remains unaffected by foreign influence. Unlike some other Russian companies, to this day Yandex has not spoken out against the war.
So do individual employees, such as Lev Gershenzon, who announced his retirement via Facebook. “It’s not too late to stop being complicit in a heinous crime,” he told his colleagues. “If you can do nothing, sign up.”
A version of this article was also published in NRC Handelsblad on April 16, 2022