The Wall Street Journal reported late Tuesday that Yahoo’s board would discuss the sale in a series of meetings from Wednesday to Friday. In a letter to Yahoo, Starboard said its position changed following the federal government’s decision not to rule on whether the Alibaba spinoff would incur billions of dollars in taxes (http://www.marketwatch.com/story/yahoos-alibaba-spinoff-wont-be-companys-savior-2015-09-08). Many had hoped that Mayer would be able to quickly make progress on the company’s comeback but, four years later, little progress has been made. The firm argued Yahoo should proceed with finding a buyer for its Internet business.
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Yahoo (Hanover: YHO.HA – news) is considering a radical move to sell off its core business as a three-year turnaround effort from Marissa Mayer fails to bear fruit, according to reports.
Less than half of Yahoo’s market cap now is attributable to Yahoo’s own business, according to a Thomson Reuters Breakingviews calculator.
Yahoo is an entity that despite having lost its status as a household name perhaps as long as a decade ago, is still a monstrously successful company.
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. The Wall Street Journal first reported that directors might reconsider whether to spin off Yahoo’s (NASDAQ:YHOO) 15% stake in China e-commerce giantAlibaba Group (NYSE:BABA) – the main value engine for struggling Yahoo. “It also has a still relatively strong (and still relatively large) sales force”. Under her supervision, the company has modified its mobile apps including Yahoo Mail, Weather, Sports and Finance.
At Alibaba’s current valuation, Yahoo’s stake in the company now values near $32 billion.
“To me that would be most valuable to sell”, said Ivan Feinseth, an analyst at Tigress Financial Partners. An earlier WSJ article said that an Alibaba spinoff would put the company’s focus “squarely on Yahoo’s core business” – despite its expanded online video offerings, such as its exclusive National Football League live-stream of a regular-season game, and original content along with its increased online video advertising plays.
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The board’s deliberations are also taking place under pressure from a prominent activist investor, the hedge fund Starboard Value, which has spent more than a year trying to push Yahoo to take action to raise its stock price. “The proposed spin-off of Aabaco Holdings is not Yahoo’s best alternative”.
