The Strategist

Yahoo Goes on Sale

02/03/2016 - 14:51

Yahoo! has unveiled disappointing results for the fourth quarter and full 2015. These gloomy news was followed by announcement sale of a number of non-core assets, reduction of 15%, and closing of five offices in different countries to reduce costs. In addition, the company announced that, while striving for profitability, it will "consider strategic proposals", and this could mean its willingness to sell key assets, too.

Scott Schiller via flickr
Scott Schiller via flickr
On Tuesday, Yahoo! presented results of the fourth quarter and the entire 2015. The quarterly loss amounted to $ 4.43 billion (Yahoo! had net income of $ 166.3 million in 2014) due to massive depreciation of certain assets. In particular, the media company wrote off $ 230 million. This is cost of the blogging site Tumblr, which Yahoo! acquired with great hoopla for $ 1.1 billion in 2013. In the whole 2015, the company also received a loss even slightly lower than quarter - $ 4.36 billion, and in 2014, Yahoo! has an annual income of $ 7.5 billion.

Given the situation, head of Yahoo! Marissa Mayer announced launch of "aggressive strategic plan to simplify the company, concentration of its attention on the strong areas for more growth, increase revenue and efficiency in 2016 and beyond." If we translate these words into numbers, then Ms. Mayer, in particular, intends to layoff 15%, or 1.7 thous. the company's employees later this year. Thus, since Marissa Mayer topped Yahoo! in the autumn of 2012, the company's staff will turn out be the smallest - about 9 thousand. employees (in 2012 there were 14.2 thous.). In addition, Yahoo! will close five offices in cities like Dubai, Mexico City, Buenos Aires, Madrid and Milan. These measures, according to the company's management, will help save $ 400 million in transaction costs during the current year.

Further, Yahoo! will sell a number of non-core assets to concentrate on three main areas: mail service, online search and Tumblr, on which the company does not give up, despite the fact that it did not live up to the parent corporation’s expectations. The Strategic Plan also implies separation Yahoo’s existing stake in Alibaba Group Holding and shares in Yahoo! Japan. Bloomberg estimated that the share price of Yahoo! in Alibaba is $ 32.6 billion, and Yahoo! Japan - $ 8,7 billion. The market value of the same Yahoo! is now about $ 27 billion.

However, investors was not much impressed by Mrs. Mayer’s schemes - Yahoo! shares fell 1.2%. Over the last 12 months, their fall has reached 36%. As stated in an interview with one of Yahoo’s shareholders the company SpringOwl Asset Management, the "Strategic Plan does not address the key issues that damage shareholders: an inefficient allocation of capital, poor strategic partnerships, uncontrolled spending and overstaffed."

By the end, most investors' attention was attracted to Ms. Mayer’s following sentence: "In addition to the continuation of work on the restoration of profitability ... we will consider appropriate strategic proposals." According to investors, it could mean that the company has finally thought about selling key assets, as urged by some shareholders, in the hope that management that is more efficient will help Yahoo! return the profit.