Yahoo $YHOO: What's It Worth Without Alibaba and Yahoo Japan? (video)

Yahoo Drama Explained - One of the oldest and most well-known online companies, Yahoo [yahoo.com], may be putting its core business up for sale. The WSJ's Rick Carew explains why in the video above (published 2 Dec 2015).

"Yahoo’s Core Business EBITDA has been decreasing at an alarming rate. In fact, in Q1 and Q2 of 2015, Yahoo’s Core Business became free cash flow negative. Additionally, on a year-over-year basis, the magnitude of the decline keeps continuing and accelerating without benefit of lapping or stabilizing. This should be enormously alarming for management and the Board." --Letter (pdf) from activist shareholder Starboard Value LP to Yahoo Board of Directors, August 10, 2015.

Above: Yahoo 5-year stock chart ($YHOO) as of 3 Dec 2015 (source: google.com)

Yahoo's 15% stake in Alibaba is now worth about $32 billion, and its 35% stake in Yahoo Japan is worth about $8.5 billion. Meanwhile, Yahoo's core internet business has faced competitive pressures and unfavorable industry trends--shift to programmatic, shift to mobile. The Wall Street Journal has reported the Yahoo Board is considering not spinning off, as previously announced, its stakes in Alibaba and Yahoo Japan, but instead, selling Yahoo's core internet business. So what's the value of Yahoo without Yahoo’s stakes in Yahoo Japan and China's Alibaba Group Holding Ltd. $BABA? The Wall Street Journal asked several analysts:

Citigroup analyst Mark May: Yahoo’s core internet businesses could be valued at roughly five to six times its forward earnings before interest, taxes, depreciation and amortization. At that multiple, the enterprise value of the Internet businesses could fall between $3.4 billion and $4.1 billion. Investors are currently valuing it at 2.5 times forward EBITDA, giving an enterprise value of $1.7 billion.

Cantor Fitzgerald analyst Youssef Squali: A multiple of 4X EBITDA because of the core business maturity and more limited growth potential which values the businesses at about $3.9 billion, or $4.12 per share. Among Yahoo’s core internet assets, only the search business is profitable.


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Starboard Value Letter to Yahoo $YHOO and CEO Marissa Mayer (video)

UPDATE 9 Dec 2015: Yahoo $YHOO Update: Reverse Spin Off Planned, Webcast Replay

UPDATE 24 Nov 2015: Yahoo CEO Marissa Mayer Faces Morale Challenge - WSJ: "When the Ms. Mayer is forced to deliver bad news, she employs what she calls a “jiu-jitsu move”—trying to create a diversion by producing tantalizing information, according to people who have worked closely with her. For example, Ms. Mayer created an accounting metric called “Mavens” designed to spotlight the growing parts of Yahoo. The grouping includes revenue from mobile, video, native and social ads but excludes Yahoo’s largest portion of revenue—its shrinking business of display ads on desktop computers."

UPDATES 20 Nov 2015:

• Yet Another Top Yahoo Media Exec Departs | Re/code: "...Barrett came to the Silicon Valley Internet giant in 2011 after a long and varied career in interactive media, including at the Los Angeles Times, ABC and Time Inc. He has most recently reported to Martha Nelson, the SVP of all of Yahoo Media. More pertinently, Barrett has been part of a major exodus of talent from Yahoo, which is still struggling under the leadership of CEO Marissa Mayer. Another top media exec, Ken Fuchs, also departed recently, as well as media head and CMO Kathy Savitt. Pressure on the former Google exec (Mayer) is increasing as press and also investors are calling attention to Mayer’s management and strategy for making the company relevant again..."


• Forbes gives the details of the ongoing disaster at Yahoo: The Last Days Of Marissa Mayer? - Forbes: "... most say a confused strategy and mismanagement, specifically from Mayer, has undermined any attempts at a turnaround. Yes, she originally brought hope, a badly needed focus on products and a keen understanding of technology. But as pressure to deliver results has mounted, there’s widespread belief, as reflected in that employee survey, that she’s no longer up to the task. The past few months have seen a mass exodus..." (emphasis added) - See also: SunTrust stock analyst Bob Peck to Yahoo directors: Time to fire CEO Marissa Mayer? - Silicon Valley Business Journal - BTW: When did Marissa Mayer become Yahoo CEO? Answer: July 17, 2012.

It has become increasingly clear that Marissa Mayer is not only grossly overpaid, but is way over her head as CEO of Yahoo. After disastrous moves that have cost Yahoo (NASDAQ: YHOO) shareholders hundreds of millions of dollars, activist investor shareholder Starboard Value has launched a new tack in a letter sent to Yahoo (pdf), sell Yahoo's core business and have the Yahoo corporate entity continue to hold its current shares in Alibaba (NYSE:BABA) and Yahoo! Japan (Tokyo Stock Exchange: Yahoo Japan Corporation) instead of the announced spin-off of those investments to Aabaco Holdings which risks unfavorable tax treatment:

"... we believe selling the Core Business now is the best outcome for Yahoo shareholders. We urge you to change direction and do the right thing for shareholders. As we have expressed to you, we expect the shareholders’ interest to remain of paramount importance and will look to make significant changes to the Board if you continue to make decisions that destroy shareholder value." (empasis added)

Principal domain names of companies referenced:
Yahoo - yahoo.com
Starboard Value -  starboardvalue.com
Alibaba - alibabagroup.com  /  alibaba.com
Yahoo Japan - yahoo.co.jp

For further reading:

• Starboard Value's Jeff Smith: The investor CEOs fear most - Fortune
• A Primer on Starboard, the Activist That Pushed for a Staples-Office Depot Merger - The New York Times
• Yahoo Plans Spin-off Of Alibaba Shares To Aabaco Holdings In 2015 | DomainMondo.com
• Yahoo Pressured to Keep Alibaba Stake and Sell Core Business - The New York Times
• Can Marissa Mayer Turn Around Her Turnaround of Yahoo or Is the “End Game Near"? | Re/code
• An NYU professor just said Marissa Mayer’s pregnancy is the only thing preserving her job - Quartz
• Marissa Mayer’s Convoluted Yahoo Strategy | Re/code
• Yahoo Hires McKinsey to Mull Reorg, as Mayer Demands Exec Pledge to Stay | Re/code

NYU Professor: Yahoo Should Be Euthanized, and Marissa Mayer Is the Most Overpaid CEO in History - Bloomberg Business (video below):

Allow video to load after clicking play. If video does not play on your device go to link above.


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What To Do About Yahoo? (video)

Yahoo Faces Tough Search for Japan Exit - WSJ: ".... Yahoo may ... spin off the Yahoo Japan stake into a separately listed unit, similar to what Yahoo intends to do with its Alibaba stake. Such a strategy could save Yahoo shareholders billions of dollars in taxes. It would also lead to a somewhat awkward situation where not one, but two Asian Internet companies have rump spinoffs. Unless a big buyer emerges, that looks to be the eventual fate of Yahoo’s Asian investments." (read more at the link above)

"Yahoo is amidst a multi-year transformation to return an iconic company to greatness. This quarter, we saw encouraging revenue growth of 8%, with display revenue growing a modest 2% and search growing 20% on a GAAP basis... "We anticipated that we would grow GAAP revenue ahead of revenue ex-TAC and EBITDA, and that's precisely what we saw this quarter. For the next phase ... we will focus on accelerating our GAAP revenue growth while managing our margins and costs." - Yahoo Earnings Release Q1 2015

For an upbeat assessment of Marissa Mayer's vision and strategy for Yahoo going forward see:  Is Marissa Mayer Running Out of Time? (video) - Bloomberg Business: Hyperstop Managing Partner Johnny Won discusses Yahoo’s mobile search and native advertising efforts with Pimm Fox on “Taking Stock.” (Source: Bloomberg - April 21, 2015)

YAHOO INC (Form: 10-K, Received: 02/27/2015): "Yahoo! Inc... is a guide focused on making users’ digital habits inspiring and entertaining. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. This focus is driven by our commitment to creating highly personalized experiences that reach our users wherever they might be—on their mobile phone, tablet or PC. We create value for advertisers with a streamlined, simplified advertising technology stack that leverages Yahoo’s data, reach and analytics to connect advertisers with their target audiences. For advertisers, the opportunity to be a part of users’ digital habits across products and platforms is a powerful tool to engage audiences and build brand loyalty. Advertisers can build their businesses through advertising to targeted audiences on our online properties and services (“Yahoo Properties”) and a distribution network of third party entities (“Affiliates”) who integrate our advertising offerings into their Websites or other offerings (“Affiliate sites”; together with Yahoo Properties, the “Yahoo Network”). Our revenue is generated principally from display and search advertising...." 

Yahoo! (YHOO) Marissa Ann Mayer on Q1 2015 Results - Earnings Call Transcript | Seeking Alpha

domain name: yahoo.com

http://www.nasdaq.com/symbol/yhoo


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