Yahoo's board is expected to discuss big strategic
options -- including the possible sale of its core Internet business -- when it meets Wednesday through Friday of this week, according to anonymous sources cited in a report by The Wall Street Journal.
The report, which broke
Tuesday evening after the market had closed, indicated that a number of significant options were expected to be discussed, including the fate of CEO Marissa Mayer.
According to a
follow-up report by Reuters, Yahoo declined to comment on the Wall Street Journal report.
Yahoo Finance’s own investor message board lit up with speculations of an outright sale and the potential impact on the company’s stock value, which has been trending near its
52-week low. Shares were trading up 6% in after-hours trading following the news.
Among other likely discussion points, the board is expected to vote on Yahoo’s spinoff or more than $30
billion in shares of Chinese commerce site Alibaba. Putting a value of $1.9 billion on a spinoff of Yahoo’s core business, Pivotal Research Group analyst Brian Wieser endorsed the prospect in a
note sent to investors late Tuesday.
“Yahoo’s core business is in seemingly permanent decline on a like-for-like basis, with growth salvaged over the long-run by the use of free
cashflow to buy revenue through acquisitions,” he wrote, adding: “As it stands, Yahoo can remain a large player in search without external acquisitions, but anything other than No. 1 may
be a weak position.”
Specifically, Wieser advised there are challenges to Yahoo’s search business growth due to consolidation around Google and the risk that Facebook could enter
the category. In the display ad market, Wieser said Yahoo faces “deflationary” market conditions:
“Yahoo is hit hard because it historically was able
to generate high pricing for its inventory. This was true because Yahoo offered (and still offers) relatively good targeting and efficiently aggregated audiences. However, in a programmatic era,
efficient audience aggregation is not unique to Yahoo. To some degree Yahoo can retain “share of wallet” by adding more video inventory to its mix of ad units (as video units typically
command higher prices vs. display) but this opportunity may be limited as every other publisher adds more and more video inventory to their properties. Otherwise, ongoing investment in content may
help, but strategic and executional choices probably need to be changed and / or improved.”
Yahoo’s greatest asset, he said, is a still “relatively large
user base,” particularly its email users.
“The big question is whether anyone would actually show up with a meaningful bid,” Wieser concluded, adding:
“We can understand why a buyer looking to attach their existing assets to a large media property might look at Yahoo only reluctantly vs. alternative strategies. We can also imagine that there
would be private equity buyers -- or individuals with private equity backing and different ideas as to how to turn the business around (or different executional capabilities) -- who would come up with
realistic bids if strategic buyers did not.”
Sounds as if low-ball CPM fixated programmatic buying is one of the main reasons for Yahoo's problems. Food for thought, media sellers?