The tax ruling appears to be the major factor behind Yahoo’s new change of heart, and now the company has made a decision to retain the Alibaba stake and instead spin off the rests of its core Internet business into a separate company (English article, Chinese article).
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The California Internet pioneer is now exploring a different strategy that would sell off its “core” operations according to CNBC.
Yahoo’s market value based on its share price is more than 32 billion but most of that is based on the value of its Alibaba holdings.
May 20, 2012Yahoo agrees to sell half of its prized stake in Alibaba for about $7.1 billion (roughly Rs. 47,434 crores).
Verizon Communications (NYSE:VZ) might consider purchasing struggling Web portal Yahoo, a top Verizon executive said during a media conference in NY on Monday.
But such a plan would be more radical and likely end Yahoo in its present form some three years into a turnaround effort by chief executive Marissa Mayer.
Yahoo’s “fundamental challenge” to its core business “is the fact that the platform is simply much less relevant to advertisers than it used to be, when it was labeled as a portal and more recently aggregated content from multiple sources, while producing relatively little of its own unique content”, said Rosenblatt Securities analyst Martin Pyykkonen in an industry note on Thursday. Mayer is mulling a shift in direction as part of a sweeping review of the company.
The reverse spin-off will take a year or more to complete – if all the necessary hurdles are jumped in the meantime.
As an example, with 600 million mobile users, Yahoo should be generating $3.9 billion in mobile advertising revenue each quarter, said Windsor. “We believe that we are tremendously undervalued and we think the best path to unlocking that value is by separating the Alibaba assets from our operating businesses and also turning around the performance in our operating business”, Webb said during a Wednesday conference call. Yahoo later sold down that stake, netting billions of dollars in profits.
Yahoo’s reversal of its earlier decision to spin off its 15 percent stake of Alibaba into a separate company will have no impact on Alibaba.
Will Aabaco Small Business be renamed Yahoo Small Business, and will merchants have to switch servers again? Yahoo stockholders would get shares of Aabaco. But the IRS jeopardized that plan by refusing to guarantee a tax exemption.
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The handling of the Alibaba stake is crucial to Yahoo shareholders because of the money involved. Multiple options were discussed and considered regarding company selling it’s under pressured Internet business. Yahoo has been in trouble for years and the company has had a number of CEOs who have tried to turn things around.
