Analysts have put little value on the business, with nearly all of Yahoo’s market capitalization of about $34 billion ascribed to its stakes in Chinese e-commerce company Alibaba Holding Group Ltd and Yahoo Japan.
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Some of the companies that might purchase Yahoo’s core business include Verizon Communications Inc., which earlier this year snatched up rival AOL for about $4 billion, and Comcast Corp., which could use the Web portal to help expand its digital offerings.
Shares of Yahoo rose sharply Wednesday on the news.
Yahoo has forecast an 8 per cent revenue drop in 2015 on ad market share losses and its stock is off 33 per cent over the past 12 months – even after a 7 per cent spike Wednesday on the prospect of a tax free spinoff of assets to private equity buyers.
“This is a scale business”, he said, referring to Yahoo’s ability to sell ads against search and news. Starboard has also suggested it retain Yahoo Japan, a successful joint venture with Japan’s Softbank.
Her arrival kicked off heightened expectations of a quick turnaround at Yahoo, which had struggled to grow its advertising business to compete with market leaders Google and Facebook. Abaco will hold the Alibaba stake temporarily as Yahoo spins off it to evade tax authorities.
Such a sale would mark an abrupt change of plans at the company, which has been trying to revitalize its business for more than three years under CEO Marissa Mayer, while spinning off the ancillary Asian investments in a transaction expected to close in January.
Yahoo was planning to complete the spinoff of its Alibaba stake, now worth more than $30bn, by next month, Ms Mayer said on the firm’s third-quarter conference call in October – later than a previous target of year’s end.
Although getting rid of the stake remains the official plan, Starboard, an activist investor, has urged Yahoo to instead sell off its core business, essentially rendering what is left an investment vehicle.
“I have very aggressive expectations for Yahoo’s core business”, she said.
A private equity firm might like the way she has positioned Yahoo, while a bigger company might simply want to absorb it, said Suntrust Robinson Humphrey analyst Robert Peck.
The board meets at a time of intensifying debate over the future of both the company and Mayer’s future at the helm.
Mayer gets credit for picking up some young companies in advertising technology, but Peck said Mayer should have been more prudent, particularly with the US$1 billion acquisition of Tumblr.
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Another analyst, Youssef Squali of Cantor Fitzgerald, had valued it at $3.9 billion, not including cash. She has made efforts to reshape the company for the mobile era as more users shift to tablets and smartphones from PCs.
