Yahoo may be up for sale, strategic review could last months

By Trevor Mogg September 23, 2011

A leaked email from Yahoo co-founders Jerry Yang and David Filo, and board chairman Roy Bostock to Yahoo employees appears to suggest that the company is looking around for buyers, though whether a sale would involve part of the firm or the whole lot isn’t yet clear. The email also informed Yahoo’s 14,000 or so employees that a review of its business strategy will most likely take “months not weeks.”

The email says that the company has hired investment bank Allen & Company to help with its review and that “they are fielding inquiries from multiple parties that have already expressed interest in a number of potential options.”

Carol Bartz was fired from her position as Yahoo CEO earlier this month and since then there’s been plenty of industry talk about the company being bought, though up until the leaking of the email there was no real suggestion of this possibility from Yahoo itself.

Upon Bartz’s departure, former Yahoo CFO Tim Morse was installed as CEO, though this is a temporary measure. “….the Board has commenced a search for a permanent Chief Executive Officer. That process also continues,” it said in the email.

The email appeared to have been sent in order to reassure employees at a time when there are many rumors flying around regarding its future. “We don’t have specific news to share with you today, but we are committed to communicating with you directly from time to time – especially given the level of external swirl – so that you know where we are in the process,” it said.

The email also had some words to say about how the company might re-establish itself as a leading player in the online world: “What Yahoo! needs to do better….is accelerate innovation, reignite inspiration, and give our users what they want now – great content that is engaging and easy-to-use on any device and provides an experience in which they can participate and contribute. Perhaps most importantly, we need to anticipate what they will want next.”

While anticipating what users want is undoubtedly key to the success of any business, until Yahoo comes up with a long-term strategy and choose a new CEO, little progress is likely to be made.

[Source: Business Insider; WSJ]

Editors' Recommendations

Contributing Editor

Not so many moons ago, Trevor moved from one tea-loving island nation that drives on the left (Britain) to another (Japan)…

Computing

Report: Yahoo considering sale of Asian assets

yahoo_marquee_billboard

The Wall Street Journal reports (subscription required) that Yahoo's board of directors is exploring a plan that would have the struggling Internet company raise cash by selling off its coveted Asian assets in a deal that could total up to $17 or $18 billion. According to the story, the complex plan would have Yahoo selling its entire stake in Yahoo Japan to Japan's Softbank, and selling the a large chunk of its stake in China's Alibaba Group back to Alibaba—Yahoo currently owns 40 percent of Alibaba, which would shrink to about 15 percent after the potential deal. The transactions would have both Yahoo Japan and Alibaba setting up separate entities to handle the transactions in an effort to keep the sales tax-free.

Since firing outspoken CEO Carol Bartz back in September, Yahoo has been reviewing options to bring cash into the company so it can attempt to retool itself around core products and services. Although the company is still a power in the search marketplace (with Microsoft's Bing providing back end search muscle) and still has popular services like Yahoo Mail, Flickr, and Yahoo Messenger, the company has struggled to find its way as the Internet has turned to social networking and mobile services—both fields were Yahoo has failed to produce major hits. And Yahoo's stock price has languished since Microsoft's abortive $45 billion hostile takeover attempt back in 2008, leaving Yahoo investors frustrated and angry.

Web

Yahoo sale rumors swirl again: Who might buy, and why?

yahoo_building-prv

Just a month after Yahoo's board of directors summarily kicked CEO Carol Bartz to the curb, rumors are swirling that the once-mighty Internet company is gearing up for a sale. Reports have Yahoo engaging Goldman Sachs and Allen & Company to do due diligence and gather financial information together in preparation, and Reuters has reported Microsoft is already circling—although Bloomberg refutes it.
Yahoo has been struggling since Microsoft's protracted $45-billion hostile takeover sideswipe back in 2008, with the company today valued at something like $18 billion. There's no denying that the company has lost a lot of its luster. Who would be interested in buying Yahoo today—and, more importantly, why might they think it was a good move?
Yahoo's strengths
Yahoo may not be the Internet titan that it once was, but it still has a number of popular services and significant momentum amongst Internet users. Back in the day — before there were search engines — Yahoo was the de facto guide to the Internet: If you weren't listed in Yahoo (and accurately) you really didn't exist. While that role has largely been taken over by Google's automated crawlers and search engines, Yahoo was able to leverage that early lead in Internet guidance into major footprints in a number of business. Yahoo is still a major Internet portal, even in an age when the idea of businesses built around "portals" seems incredibly passé. Yahoo serves as many Internet users' home page, thanks to its strong stable of content offerings spanning news, entertainment, sports, video, and games.
Yahoo was one of the first companies to bring together the idea of pages with content customized to users' interests, and it supplemented that idea with its own search engine (now powered behind the scenes my Microsoft's Bing). Yahoo also runs one of the earliest successful forays into Web-based email (Yahoo Mail is second only to GMail in the U.S. market), and a host of ancillary sites and services that Yahoo acquired over the years. A notable gem in that bunch is the photo sharing service Flickr, which, despite some stagnation and the departure of its founders (they're over at Glitch), remains the Internet's premiere photo sharing community. It's even thrived in an era seemingly dominated by YouTube. Yahoo Messenger also remains a strong IM platform, and the company has tried to stake out claims in the mobile services market.
All this translates to page views, and those views are the core of Yahoo's business. Yahoo saw almost 900 million page views when news of Osama bin Laden's death broke; similarly, the British Royal Wedding generated some 400 million page views in one day (PDF). Advertisers love numbers like that.
Although not all of Yahoo's acquisitions have worked out well, a few of its investments have become very valuable, most notably its 40 percent stake in China's Alibaba and a 35 percent stake in Yahoo Japan. The Alibaba Group is China's ecommerce leader (operating Alibaba.com and Taobao), and Yahoo Japan is a wholly separate operating from Yahoo proper, despite bearing the same name. (For instance, Yahoo Japan uses Google for its search function.) The value of Yahoo's investments in these companies has led some industry watchers to characterize Yahoo not as an Internet company so much as a holding company in Asian tech stocks: Yahoo's stock in Alibaba is worth an estimated $9.4 billion, or nearly half of Yahoo's total company value. The stake in Yahoo Japan might be worth as much as an additional $8 billion. If Yahoo could sell both stakes for top dollar, it could potentially pull in more cash than Yahoo itself is worth — on paper, anyway.
Yahoo's weaknesses
Although Yahoo does offer some services for sale directly to consumers, most of Yahoo's operating income stems from search and display advertising. And pretty much everyone in the online display advertising world is struggling against Google and Facebook. Yahoo's search partnership with Microsoft is based on display advertising, and Yahoo did see its display ad revenue increase two percent last quarter to $514 million, even as the company's overall revenue saw a 23 percent decline from the same quarter a year ago.
Overall, Yahoo earned $1.23 billion last quarter, and attributes the revenue decrease largely to accounting changes related to its search agreement and revenue sharing with Microsoft, along with one-time charges like spinning off HotJobs. Without those changes, Yahoo says it revenue would only have been down 9 percent. Nonetheless, the message is clear: Yahoo might run a number of top traffic sites, but Yahoo's services aren't very "sticky" — they don't keep users around to view more ads. And despite efforts to integrate social services into its offerings, Yahoo has failed to gain traction against Facebook and social media services as as a first stop for many Internet users as they go online.
Former CEO Carol Bartz was working to trim Yahoo's costs and improve its sales organization to increase revenue from ad sales, but those efforts had not had a positive impact on Yahoo's stock price, Yahoo's investors and board clearly weren't willing to wait for results. Bartz believed that Yahoo's search deal with Microsoft would only pay off in the long term: If she was right, the relationship should start bearing fruit in the next few quarters, as Microsoft has just about paid down its $150 million cap in transition cost reimbursements.
Despite all this, it's important to note Yahoo is still making money — that's more than can be said for some Internet giants.
Who would want Yahoo?
The first, obvious choice as a Yahoo suitor is Microsoft. The company famously launched a $45 billion hostile takeover offer for Yahoo back in 2008, and currently has a long-term deal with Yahoo to provide search results for Yahoo sites in exchange for a portion of Yahoo's ad revenue. Recent reports have Microsoft considering making an offer on Yahoo, but at least at the moment, it just doesn't make much sense. Microsoft's primary interest in Yahoo back in 2008 was advertising, and making its not-yet-launched Bing search engine a major player in Internet search from.

The situation has changed considerably, in particularly because Microsoft's search deal with Yahoo has converted Bing into the number-two search engine in the U.S. market. (It's still far behind Google, but number two is better than number five, as AOL can attest.) Moreover, Microsoft's search deal with Yahoo enables the company to reap many of the rewards that would have come with acquiring Yahoo, but pay less of a price. Let's face it: Microsoft wasn't interested in massive portions of Yahoo's existing businesses like Yahoo Mail, Yahoo Messenger, mobile search and mobile apps, or even Flickr: Microsoft wanted Yahoo's sites, content partnerships, and Internet page views. With the search partnership, it gets a lot of that without having to be the bad guy by rebranding and eventually shuttering many of Yahoo's signature services. It's pretty easy to argue the Microsoft-Yahoo search partnership favors Microsoft more than Yahoo.
Are there other suitors? Alibaba's Jack Ma initially indicated he might be "very interested" in buying up Yahoo—remember, Yahoo isn't just a major presence in the U.S. market, but also operates numerous top sites in Europe and the Asia-Pacific markets. However, Ma's initial enthusiasm for Yahoo has apparently been quelled by U.S. investment regulation. Any Alibaba acquisition of Yahoo would have to survive a lengthy and rigorous government review, and it undoubtedly be a political hot potato. Relations between the U.S. and China have been strained in recent years over censorship and human rights issues, and Chinese companies like Hauwei have been repeatedly dissuaded from making major investments in U.S. companies over allegations it is in league with the Chinese government. Although it's hard to see how a Yahoo acquisition would impact U.S. national security, much political hay could be made of Chinese authorities tapping into U.S. Internet users' search and browsing behaviors. Ma also might face skepticism from Yahoo's board: Alibaba's spinoff of Alipay into a separate, Chinese-owned company was a huge point of contention between Yahoo and Alibaba. The dispute took months to work out, and may have been a contributing factor in the Yahoo board's dissatisfaction with Bartz.
AOL has repeatedly indicated it's interested in a tie-up with Yahoo: AOL is working to rebuild itself as an Internet content and advertising firm, and — as a media company — Yahoo's pageviews and infrastructure must be very attractive. However, Yahoo has repeatedly indicated it has no interest in a partnership or merger with AOL. Even if it were, it's not clear where AOL would get the cash to fund such a move, although the company has apparently talked to bankers about ways to fund a deal. But rumors of AOL's interest persist.

Web

Yahoo! ‘not for sale,’ says co-founder Jerry Yang

fundador Yahoo Jerry Yang

Yahoo! is "not for sale," says the company's co-founder, director and former chief executive, Jerry Yang.According to AllThingsD's Kara Swisher, Yang made the clarification about the status of the struggling web company during a "prequel" to an "all-hands" meeting with all 13,500 Yahoo! employees, which is set to take place at 11am PST. Yang's statement follows Tuesday's blockbuster news that Yahoo! CEO Cara Bartz was suddenly fired, "over the phone," and replaced with CFO Tim Morse, who will serve as the Internet giant's interim chief executive. In a prepared statement on the matter, Yahoo announced that it is currently in the search for an executive to permanently replace Bartz, a move reportedly reiterated by Yang during today's preview meeting. In addition to Bartz's ousting, the Wall Street Journal cited an anonymous source, who told the paper that Yahoo! "is open to selling itself to the right bidder." Many took this as confirmation that the company is, in fact, up for sale. "[That statement is] the equivalent of sticking a FOR SALE sign on the lawn," wrote Henry Blodget in Business Insider. In addition the the anonymous tip, other reports indicated that Yahoo! had been hiring advisor firms, like Allen & Co., to help decide its options. Of course, this is all precluded by Yahoo!'s consistently poor performance, financially. The company's stock price took a drastic dive during the economic downturn of 2008, and has been unable to regain much ground in the years that have followed. Yahoo!'s company-wide meeting is just beginning at the time of this writing, so check back for more updates as new information becomes available.