The company reported third quarter profits totaling $76 million in October, but that’s a significant drop from the $6.8 billion in profits Yahoo reported previous year.
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Web pioneer Yahoo may sell its core business, as the company’s latest turnaround efforts continue to stall, The Wall Street Journal reported last night. Excluding the Alibaba stake, cash holdings and partial ownership of Yahoo Japan, Starboard valued Yahoo’s core business at about $2bn.
Alibaba will be interested in repurchasing its shares from Yahoo only at a steep discount, the WSJ said on Thursday, citing a person familiar with the matter.
A separation of Yahoo’s Alibaba Group and Yahoo Japan stakes from the core business would unlock immediate value for shareholders and allow Yahoo’s core business to better recruit and retain talent, according to Starboard Value. “There’s a perception on Wall Street that Yahoo growth has stagnated and some investors are agitating for a sale”, Sterling said.
Its 15% stake in Alibaba is now worth about $32 billion, and its 35% stake in Yahoo Japan is now worth about $8.5 billion.
Yahoo had hoped to spin off its Alibaba stake tax-free, but the Internal Revenue Service has not given approval for such a plan.
Marissa Mayer, chief executive officer of Yahoo!
Yahoo has struggled for many years to re-energize its business model. This is because Alibaba’s shares rose since the Chinese economy started to recover; they traded at $57 on September 28, the stock has surged up to $84 at present.
Ex-Googler Marissa Mayer took over as CEO of Yahoo in 2012 and since then she has been trying to revive Yahoo by expanding more into media and complete overhaul of core products like Mail, Finance, Sports, Weather and Flickr. If the company does decide to go ahead with this decision, it could well be one of the biggest announcements of the year, which would attract major firms from various sectors for the buyout process.
Yahoo shares rose 7% in after-hours trading following news of the breakup talks, after closing at $33.71.
Sale of core internet business: By selling the internet business in a fully taxed transaction, Squali thinks the sum-of-the-parts value for Yahoo increases to $53.14, a 47.5% upside to the stock’s current level.
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Mayer is also blamed by experts for Yahoo’s acquisition of Tumblr for a whopping $1.1 billion in 2013.
