Yahoo To Sell Core Business? Board Explores Sale Of Internet Assets

Yahoo Inc. will consider selling the company's core internet business, with the possibilities being discussed in a series of board meetings being held from Wednesday to Friday, the Wall Street Journal reports. Proceeding with a plan to sell off the company's core business is among the options on the table for the internet company, as well as spinning off its multibillion-dollar holdings in Chinese e-commerce company Alibaba Group Holding Ltd., of which it currently owns 15 percent.

The news comes among long-standing concerns about Yahoo's future. The troubled engine giant has struggled in recent years to compete with the rise of Google and Facebook, and debate now rages as to whether turning its decline around is even possible. A sale of Yahoo's core business would include such services as Yahoo Mail, as well as Yahoo News and Yahoo Search.

The Guardian reported that CEO Marissa Mayer's plans for a turnaround for Yahoo, while highly anticipated because of her successful 13-year career at Google, have not performed up to the high expectations placed on her shoulders.

"Hopes of a comeback crumbled as Yahoo's plan to push mobile, video, native and social media ads – a strategy Mayer introduced in 2014 under the acronym Mavens – failed to increase revenues as desktop search ads continued to decline."
Yahoo May Sell Off Core Business
The Yahoo logo is seen on a sign outside of the Yahoo Sunnyvale campus January 22, 2008 in Sunnyvale, California. (Photo by Justin Sullivan/Getty Images)

News of departures of top executives also haunt this announcement as it becomes obvious that Yahoo is considering all its options. Should Yahoo decide to sell its core business, private equity firms are expected to gobble up the wide variety of web assets the company owns. As a result of the option of selling its core business, Yahoo's stock has spiked more than 7 percent in trading, and more than 300,000 shares changed hands.

The plan to spin off Yahoo's Alibaba holdings, currently the prize of the company, has long been delayed due to uncertainty surrounding if the IRS could challenge the spinoff's tax-free status, which could lead to a potential tax bill costing several billion dollars.

The Wall Street Journal estimated the company's dire financial standing, which is largely determined by Alibaba and Yahoo Japan.

"Its 15% stake in Alibaba is now worth about $32 billion, and its 35% stake in Yahoo Japan is now worth about $8.5 billion. Yahoo's cash and short-term investments totaled $5.9 billion at the end of the third quarter.

"That would mean investors are valuing Yahoo's core business at less than zero if the Asian assets were spun out tax-free."

CNBC detailed that both net revenue and overall staff have declined in recent years.
"Meanwhile, net revenue has fallen from $5.4 billion in 2008 to a projected $4 billion this year, while headcount was at 11,500 in September, down 32 percent from when Mayer was hired in July 2012."
Yahoo president and CEO Marissa Mayer
SAN FRANCISCO, CA - NOVEMBER 03: Yahoo president and CEO Marissa Mayer speaks during the Fortune Global Forum on November 3, 2015 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

This is at a time when 92 percent of internet users use search engines. Prominent activist investor Starboard Value has pressured Yahoo to sell its search and display advertising businesses instead of spinning off its Alibaba holdings. It is unclear what course the board of directors will choose to take. No matter what options are considered, any decisions regarding the company are likely to put attention squarely on Marissa Mayer and the board, now preparing to decide the fate of one of the oldest and largest names in internet companies and one of the original pioneers of the internet age.

Yet, for years now, Yahoo has desperately sought a reason for existing. The main saving grace for Yahoo has been its relatively large user base, but minus Alibaba and Yahoo Japan, its value still adds up to less than zero. Should Yahoo place itself for sale, other tech companies and private equities are likely to scramble to acquire its internet assets.

Yahoo has declined to comment or report on the meetings.

(Photo by Ethan Miller/Getty Images)