Despite the best efforts of CEO Marissa Mayer, now two and a half years into her tenure, Yahoo remains stuck in the doldrums. Now, with investors clamoring for a major change in strategy, Mayer is poised to announce how she will spend Yahoo’s $37 billion windfall from its stake in e-commerce titan Alibaba. Choose wisely or risk mutiny, say analysts and investors.
“This is a defining moment for her,” Eric Jackson, managing partner of a hedge fund that owns Yahoo shares, told The Economic Times. “Marissa has a chance to really boost the stock if she plays her cards right.”
For a vocal group of investors, that means undertaking a tax-free spin-off of the company’s remaining 15% stake in Alibaba, plus its 35% stake in Yahoo Japan, also worth billions. Yahoo’s stock has been buoyed in past years by its position as a proxy for owning shares of Alibaba, but investors have been able to directly access the growth prospects of Alibaba’s Chinese customer base since the conglomerate’s $25 billion public offering on the New York Stock Exchange last September. At one point, analysts even reckoned that without Alibaba and Yahoo Japan, Yahoo was worth less than nothing.
Mayer has already used cash from Yahoo’s Alibaba wealth to buy a smattering of technology startups and Silicon Valley talent, with mixed results. The company’s fourth-quarter earnings announcement on January 27 will be a defining moment, as Mayer either heeds the advice of activist investors like Starboard Value LP, bent on seeing the the Alibaba’s stake’s value returned to shareholders, or doubles down on her goal of transforming Yahoo into a premier media property via acquisition.
Should Mayer opt for “large acquisitions and/or a cash-rich split, both of which have been speculated, such actions would be a clear indication to us that significant leadership change is required at Yahoo,” Starboard CEO Jeffrey Smith wrote in a letter to Mayer. Smith has advocated for an Alibaba spin-off, paired with cost-cutting measures and a merger with AOL Inc., Yahoo’s fellow refugee from the Internet’s early glory days.
In parallel, there have also been rumors that Yahoo is shopping for a major cable network, such as Time Warner’s CNN or Scripps Networks Interactive. Yahoo, which has been building out its video content with high-profile hires like Katie Couric, has declined to comment on the speculation.
[via The Economic Times]