Yahoo's board may end up taking the advice of an activist investor, and keep its stake in Alibaba -- while selling off the core Internet search and display advertising business that built the company. The move suggests that its current focus on mobile, advertising, online video and social media, aka Mavens, isn't providing fast-enough change to a profitable status.
It's also a sign that Yahoo may be making a larger change in its business direction, beyond CEO Marissa Mayer's drive to focus the company on its Mavens business. The Wall Street Journal reported that the company canceled an appearance at the Credit Suisse investment conference this week as investors take a much sharper look at its performance and what some perceive as a slow turnaround of its fortunes by Mayer.
News of the possible selloff sent Yahoo shares up 7 percent in after-hours trading on Tuesday, and continued upward on Wednesday, reaching $35.45 by midmorning.
The conundrum of what to do with Yahoo and its older, established business units has gone on for some time. Last year, for example, investors suggested that the Internet search and services provider team up with one of its main competitors, AOL, which was building a new programmatic advertising platform. AOL ultimately was sold to Verizon for $4.4 billion. In 2008, activist investor Carl Icahn took a stake in Yahoo and tried to convince the board to sell to Microsoft.
Last week, investor Starboard Value LP stated that it wanted the board to cancel the planned spinoff of its 15 percent stake in Alibaba Group Holding Ltd. and its 35 percent stake in Yahoo Japan. Those companies make up the majority of Yahoo's $31 billion market capitalization, WSJ said, while its core business is worth just $3.9 billion. Furthermore, the selloff is at risk of a challenge from the IRS because Yahoo failed to get prior approval of the plan from the agency.
The Alibaba spinoff is expected to be completed in January, barring any complications.
Regardless of whether the board sides with Starboard on the spinoff issue or not, Yahoo will likely keep pushing forward with its video and advertising strategies. An earlier WSJ article said that an Alibaba spinoff would put the company's focus "squarely on Yahoo's core business" -- despite its expanded online video offerings, such as its exclusive NFL live-stream of a regular-season game, and original content along with its increased online video advertising plays.
Mavens revenue in the third quarter jumped 43 percent year over year to $422 million, and Yahoo's overall revenue climbed to $1.23 billion.
For more:
- see this WSJ article (sub. req.)
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