Sunnyvale, Calif. is not looking that sunny for Yahoo lately, with new reports surfacing that its board of directors is open to selling off the company’s struggling core business.
The decision adds increasing pressure on CEO Marissa Mayer as her efforts to turn around the company continue to lag.
Rick Carew, Douglas Macmillan and David Benoit of The Wall Street Journal broke the news of a potential sale:
Yahoo Inc.’s board is planning a series of meetings this week to consider selling off the company’s flagging Internet businesses and how to make the most of its valuable stake in Chinese e-commerce powerhouse Alibaba Group Holding Ltd.
The board is expected to discuss its options in sessions beginning Wednesday and continuing through Friday, according to people familiar with the plans.
Directors are likely to discuss whether to proceed with a plan to spin off its investment in Alibaba, currently worth more than $30 billion, find a buyer for Yahoo’s gaggle of Web properties, or both, the people said.
In a sign that change may be afoot at the company, a Yahoo executive recently canceled an appearance at a Credit Suisse investment conference that was planned for Tuesday.
Private equity firms are expected to be among those taking a look at Yahoo’s core business, people familiar with the matter said.
Kara Swisher of Re/code laid out how the December meetings are maybe not that special after all:
In fact, the meetings are actually Yahoo’s typical multi-day annual board meeting always held in December. At this one, directors plan to weigh recent advice from management consultants McKinsey & Co. — which Re/code first reported on here — of which parts of the company to unload, as well as consider the status of the complicated and somewhat troubled Alibaba spinoff.
According to sources, the state of the Yahoo spin of Alibaba will be top of mind, especially due to pressure from activist shareholder Starboard Value, which the company has not yet addressed. After pushing for it previously, Starboard recently sent a letter to Yahoo demanding that it not spin off its Alibaba asset, since it is not clear — regulators have declined to rule — if the transaction will be tax-free. Thus, argued Starboard, Yahoo should instead sell off all the rest of Yahoo.
At this moment, the spinoff is still on as planned for early January. In fact, sources tell me Yahoo has already selected a CEO for Abaco Holdings, which is the name of the spinoff.
As for the other assets at Yahoo that will remain — including an $8.5 billion stake in Yahoo Japan — the current plans are to unload a number of units and cut resources to others also remain in place.
Could that turn into more than just a simple restructuring and turn out to be more? Sources said that is premature, even if the possibility must be raised by Yahoo directors to show they are listening to investors and responding to activists like Starboard.
Michael J. de la Merced and Vindu Goel of The New York Times explained how Yahoo got to where it is today:
The discussions are also sure to put attention squarely on Marissa Mayer, Yahoo’s chief executive, and the company’s direction under her leadership. Although Ms. Mayer is credited with stabilizing the company, which was in rapid decline, Yahoo has introduced no breakthrough products during her three years at the helm and has fallen further and further behind competitors like Facebook and Google in the battle for advertising dollars.
A representative of Yahoo declined to comment on the plans.
Begun as a simple website called Jerry and David’s Guide to the World Wide Web, Yahoo has grown into one of the biggest names in the Internet business.
Yet for the last decade, Yahoo has struggled to find its reason for being. Under the leadership of Ms. Mayer, a highly vaunted Google executive brought in to drive the latest turnaround effort, the company has spent billions of dollars on acquisitions like Tumblr and Polyvore that have yet to prove their value. And in October, the company announced it was writing off $42 million that it had wasted on an ill-fated foray into original video programming.
Hundreds of millions of people continue to use Yahoo, which was a pioneer on the Internet. So the core business could have value to a potential acquirer.
“The saving grace for Yahoo is that it still has a relatively large user base that is reliant on the platform so long as they maintain email addresses there. It also has a still relatively strong (and still relatively large) sales force,” wrote Brian Wieser, an analyst at Pivotal Research, in a note to clients Tuesday night. “As long as both of those factors remain in place, there would be time for an acquirer to establish new strategies and develop products while the property continues to generate cash flow.”
