Yahoo flipped its reorganisation plan on Wednesday, announcing that it would keep its stake in China’s Alibaba but spin off its core Internet business — creating new uncertainties for the struggling t
Yahoo flipped its reorganisation plan on Wednesday, announcing that it would keep its stake in China’s Alibaba but spin off its core Internet business — creating new uncertainties for the struggling tech giant.
The decision marks a U-turn on a previous plan to spin off Yahoo’s vast holdings in e-commerce giant Alibaba, which could have exposed it to a huge tax bill.
But the tech firm stuck by its intention to separate out its activities under the new structure, a move that could open the door to a sale of Yahoo’s core online operations amid speculation that the group may be headed for a break-up.
The company denied this was on the cards as it reaffirmed confidence in chief executive Marissa Mayer’s ability to revive its fortunes.
Board chairman Maynard Webb said during a conference call that “there is no determination by the board to sell the company or any part of it,” and added that Yahoo is “tremendously undervalued.”
Asked if the board retains full confidence in Ms Mayer after her three years at the helm, Mr Webb said, “Absolutely... I’ve never met anybody that works harder, that’s smarter, and cares more. So, we want to help her return this great company to an iconic place where it belongs.” When asked if Yahoo would entertain an offer to buy its online operations, Mr Webb said that Yahoo’s board would have a fiduciary duty to consider it. But he said that if a bid were to emerge, “it would probably be a lowball offer.”
Some reports say that there could be interested buyers for some Yahoo assets, and Verizon’s top executive this week suggested the telecom giant may be interested in parts of Yahoo that could fit with its newly acquired AOL unit.
Ms Mayer said that Yahoo is readying a new strategic plan to be unveiled early next year.“I remain convinced that Yahoo is on the right path,” she said. Te plan, expected to sharply cut back some of Yahoo’s operations and likely reduce the workforce of some 11,000, would create “greater transparency to ensure that Yahoo’s business operations are accurately valued,” Ms Mayer said.
Yahoo’s market value based on its share price is more than $32 billion, but most of that rests on the value of its Alibaba holdings. Yahoo bought a 40 per cent stake in Alibaba in 2005 for $1 billion. The current stake of some 15 per cent is now worth around $30 billion.
Based on its cash holdings and its investment in Yahoo Japan, Yahoo’s market value suggests that the core operations are worthless or may even have a negative value.
Yahoo shares slipped 1.3 per cent on the latest news to close at $34.40.Roger Kay, analyst at Endpoint Technologies Associates, said, “Its ad business is declining but it’s still a valuable property and will be for many years,” Mr Kay said.
“I think it’s the right thing not to sell the core assets. At some point they will shine,” he said. Yahoo’s finances have long been skewed by its large Alibaba holdings, but simply selling the stake would lead to a hefty tax bill.
