Yahoo! Inc. shares rallied 6% in Tuesday after-hours trading following a Wall Street Journal report that said the troubled firm’s board is weighing the sale of its core Internet assets.
The Wall Street Journal reported late Tuesday that Yahoo’s board would discuss the sale in a series of meetings from Wednesday to Friday. Sources familiar with the matter told the paper that the board was also likely to consider whether to proceed with the planned spin off of more than $30 billion in Alibaba shares. Yahoo could pursue both of these options, the paper added. The meeting comes amid a bigger debate about the future of the firm and that of its high-profile CEO Marissa Mayer.
Will Yahoo Appeal to Buyers?
Yahoo! Inc. ‘s core Internet assets include its popular mail service, and its sports and news sites. Analysts expect a number of private equity, media and telecom firms to be interested in the sale.
“Yahoo’s core business is in seemingly permanent decline,” Pivotal Research analyst Brian Wieser wrote to clients late Tuesday. The only saving grace is the large number of users who still visit its Web properties, and the strength and size of its sales force, he noted.
“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,” Wieser said.
Following the publication of the report, over 300,000 Yahoo shares changed hands, lifting the stock 6% to $35.60 in later after-hours trade. The stock ended regular session flat at $33.71.
Marissa Mayer is on Borrowed Time
Marissa Mayer’s reign as Chief Executive has entered its fourth year. Her arrival had set off heightened expectations of a quick turnaround. Yahoo! Inc. had for years struggled to grow its ad revenue to keep pace with market leaders Google and Facebook.
Those turnaround hopes crumbled as Yahoo failed to increase its mobile and video revenues. Then came the $1.1 billion acquisition of social blogging site Tumblr. Though the deal increased Yahoo’s user base, it could not bring in advertisers. Investors started grumbling, with many arguing that Mayer had overpaid for an unprofitable platform.
Adding to Mayer’s difficulties, the IRS refused to assure Yahoo that its planned sale of its stake in Alibaba would not incur a tax bill. Yahoo announced it would anyway go ahead with the spin off, but is yet to do anything.
If all this was not troubling enough, activist investor Starboard Value asked Yahoo! Inc. last month to shelve plans to sell its Alibaba stake and instead offload its core search and display businesses. Investors grew increasingly frustrated at this lack of direction, hammering the stock close to 6% in the past one month.