Yahoo Inc. announced on Wednesday, Dec. 9, that it is cancelling the plan to spin off its stake in Alibaba Group Holding Ltd., stifling Chief Executive Marissa Mayer’s turnaround effort and prolonging the uncertainty of a 20-year-old Internet company fighting for survival, the Wall Street Journal reported.
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When Mayer announced the pregnancy in September, she was criticized by some because she said she was only “taking limited time away and working throughout”.
The announcement comes a day after Yahoo said it would spin off its core Internet advertising and products business, instead of going forward with a plan to spin off its stake in the Chinese e-commerce company Alibaba, worth around $30 billion.
Yahoo began this year by drawing up plans to spin off the Alibaba stake into a separate holding company called Aabaco in what was supposed to be a tax-free move. Another activist shareholder, Jeff Smith of the NY hedge fund Starboard Value, had threatened to lead a mutiny if Yahoo’s board hadn’t backed off from the Alibaba spinoff.
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. Also, Mayer will stay engaged with the company as needed with her CEO duties, the person said. Yahoo later sold down that stake, netting billions of dollars in profits.
Yahoo stock was down a fraction in midday trading in the stock market today, near 34.
“We believe that the previously announced spin off would be tax free to Yahoo and its shareholders”, said Maynard Webb, Chairman of Yahoo’s Board of Directors. Yahoo’s problems began when it lost the Web search battle to Google more than 15 years ago and never recovered from the blow, despite a partnership with Microsoft (on Mayer’s watch) to use Bing IP. Its properties are frequented by more than 1 billion active users each month, and more than 600 million of those years are on mobile, the company says. She has been under heavy pressure to split the company in two. Instead, it said it is looking at creating a separate company to hold the rest of its assets.
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PayPal co-founder and board member Max Levchin is stepping down, but reaffirmed his confidence in Mayer and Yahoo in a statement published to Twitter on Thursday.
