However, even if the spin-off of only the Alibaba shares does go through, it will leave Yahoo in a much weaker position than before and will likely make Marissa Mayer’s job in turning the company around a lot tougher. The potential bill dwarfs the estimated value of Yahoo’s operating business, which analysts peg at $2 billion to $4 billion, after subtracting the roughly $7 billion that the company has in the bank.
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Starboard doubled its stake in Yahoo in the third quarter, after earlier selling part of its holdings.
Yahoo’s board will weigh a sale of the business – which some analysts said could be worth in the neighbourhood of $4bn – at a board meeting due to take place yesterday, a source familiar with the matter told Reuters.
A planned sale of its stake in Chinese search giant Alibaba has hit bump in the road after the U.S. taxman ruled it wouldn’t be a tax-free move. If things continue to deteriorate at Yahoo and more shareholders clamor for a new CEO, it doesn’t take much imagination to envision Mayer deciding to step down to spend more time with her children at some point next year.
She said that the transaction would let the company focus on markets where it could have an effect.
The company has a hard time competing with market leaders like Google and Facebook, as it struggles to grow its advertising business.
Yahoo’s 15 percent stake in Alibaba is now worth about $32 billion, and its 35 percent stake in Yahoo Japan is worth about $8.5 billion, according to the Wall Street Journal. In an interview on Tuesday after news of the potential board talks was published, Jeff Bonforte, Yahoo’s senior vice-president for communications products, said employees were continuing to work on new products and features. In October, Yahoo said it would update shareholders with a strategic plan for the post-Alibaba era during its next earnings call, expected next month. “Yahoo’s core business is in seemingly permanent decline”. In November, the activist investor group Starboard urged Yahoo in a letter to keep its stake in Alibaba, and instead get rid of its Web properties. “It also has a still relatively strong (and still relatively large) sales force”, wrote Brian Wieser, an analyst at Pivotal Research, in a note to clients on Tuesday night.
Yahoo may be selling its core businesses, including email, news and online search.
“That would mean investors are valuing Yahoo’s core business at less than zero if the Asian assets were spun out tax-free”.
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The board is also looking at whether to keep CEO Marissa Mayer.
