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Breaking Up Yahoo

Yahoo, the once dominant presence on the internet is breaking up. The best investment that Yahoo made this century was its stake in the Chinese online retailer Alibaba. Unfortunately Yahoo does not want to pay the taxes required if they sell their stake. And the rest of Yahoo is in a long slow slide downhill. So, breaking up Yahoo is the choice that they have made but what they are breaking off is the core business and what they are keeping is their stake in Alibaba! The New York Times writes about Yahoo’s plan to spin off its core business.

Yahoo said on Wednesday that it had dropped a plan to spin off its $31 billion stake in Alibaba, the Chinese e-commerce company. Instead, the company will spin off all of its other assets, including its stake in Yahoo Japan, into a new company.

The decision not to sell the Alibaba stake, which was reported on Tuesday, was driven by “the market’s perception of tax risk” associated with the Alibaba plan, Yahoo said in a statement on Wednesday morning.

“The board remains committed to accomplishing the significant business purposes and shareholder benefits that can be realized by separating the Alibaba stake from the rest of Yahoo,” Maynard Webb, the chairman of Yahoo’s board, said in the statement. “To achieve this, we will now focus our efforts on the reverse spinoff plan.”

Yahoo shareholders would end up with stock in both companies. The company said the new plan might take a year or more to conclude.

It appears that breaking up Yahoo in this fashion will result in more shareholder value as the new entities will probably be worth $40 for each share of Yahoo which is worth $35 a share today.

A Slow Decline

The Guardian writes about Yahoo’s seemingly permanent decline. Critics are blaming CEO Marissa Mayer for failing to turn the company around.

Is Yahoo approaching its final yodel? The tech company is reportedly in talks to spin off its core business, as well as whether to finally divest its remaining stake in Chinese e-commerce company Alibaba, the latter fabulously lucrative, the former … well, not so much.

The lion’s share of the blame for what ad industry analyst Brian Wieser called a state of “seemingly permanent decline” in a note to investors this week is falling on its once celebrated CEO, Marissa Mayer.

Mayer arrived with much fanfare from Google with plans to restart the ailing tech company. Google’s 20th employee and a self-described “geek”, Mayer promised a “renewed focus on product innovation to drive user experience and advertising revenue”. But critics charge Mayer has failed to pick a direction in the three years since her elevation.

But Mayer did not take over a thriving company and run it into the ground. Yahoo had been losing ground for a decade. It used to be the internet giant and has been passed by the likes of Google and Amazon.com.

Who Would Want to Buy Yahoo’s Core Business?

There is a lot of speculation that once they are done breaking up Yahoo, someone will come in and buy the core business. Fortune speculates that on why Verizon would buy Yahoo.

Verizon’s strategy is own the connectivity through its wireless business, and offer content through its media business.

Verizon is “creating a media company to deal with the digital millennials that are out there,” McAdam said. That includes Verizon’s Go90 app, which launched in October and has not cracked the top 100 apps in Apple’s App Store, according to analytics company App Annie. Verizon even hired 1,000 people in Silicon Valley to work with startups, though McAdam didn’t elaborate as to how they do that.

Given that strategy, it’s easy to see why Verizon might want to acquire a digital media property like Yahoo YHOO 0.52% .

Yahoo as part of a large and stable business might make sense and help bring that core business back to life.

Breaking Up Yahoo PPT





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