Investors have concluded that Yahoo’s Internet business is worth next to nothing, largely because its ad revenue has been sinking for years even though marketers have been steadily increasing their spending on digital campaigns.
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In recent days, Yahoo investors have been calling for a new plan and new leadership to restore the value of the company.
Jackson calculated that Yahoo could get about $6 billion if its core businesses were sold. It will further extend the attempts of CEO Marissa Mayer to turn the company around. All the while, Yahoo seemed ready to spin off the company’s Alibaba holdings into a separate company.
Yahoo flipped its reorganization plan last week, announcing it would keep its stake in China’s Alibaba but spin off its core Internet business – creating new uncertainties for the struggling tech giant. The company explained the tax climate for spinning off Alibaba holdings was simply unfavorable for investors.
To help make his point, Jackson goes over everything Mayer has blown money on, from failed acquisitions to lavish parties and sponsorships. Canyon Capital Advisors, one of Yahoo’s 15 biggest shareholders, wrote to the board on 11 December urging it to find a buyer for the core internet business or the whole company. As I wrote, the plan effectively means more of the same over the next year. The document was authored by Eric Jackson, a hedge fund manager at SpringOwl Asset Management which owns a tiny slice of Yahoo stock.
The fund does not have a major shareholding in the company, but he has met several of the company’s largest investors to build support for his plan.
Meanwhile, what Canyon Capital wants-to sell Yahoo now-stemmed from Yahoo’s supposed failure in preparing a backup plan for the Alibaba spinoff.
Getting rid of 9,000 employees along with “free food and other expensive sponsorships” such as parties could save the company at least $2 billion annually, the presentation said. Among other suggestions, SpringOwl wants Yahoo to “Milk the PC business longer than anyone expects (ala AOL)” and “Cut non-performing businesses & internal search plans”.
“Whoever is the next CEO will need to take Yahoo core down to its studs in terms of its costs”, Jackson said.
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A $1bn deal for Tumblr in 2013 was criticised by investors – it lifted Yahoo’s user base to around one billion but did not bring in advertisers.
