SUNNYVALE, California (BLOOMBERG) - Yahoo! Inc.'s board will consider a potential sale of the company's main Internet businesses in a series of meetings starting Wednesday, the Wall Street Journal reported, citing people familiar with the matter.
The board will discuss whether to stick to its plan to spin off the company's stake in Alibaba Group Holding Ltd., to find a buyer for Yahoo's Web businesses, or both, the paper reported Tuesday, without naming the people. Representatives for Sunnyvale, California-based Yahoo declined to comment.
Chief Executive Officer Marissa Mayer had planned to complete the spinoff by January, and promised to update investors on her strategy for the rest of the ailing Web portal. Mayer is facing renewed pressure from activist investor Starboard Value, which last month threatened a proxy fight if she doesn't make drastic changes to her plans, including selling the main search and display advertising businesses.
In more than three years at the helm, Ms Mayer has made little progress turning around the company, whose revenue is forecast to drop 8 per cent in 2015. Yahoo shares have declined 33 per cent this year.
Most of the company's value is tied to its stake in Chinese e-commerce giant Alibaba. In a letter dated Nov 19, Starboard estimated that Yahoo's enterprise value is US$31.2 billion (S$ 43.9 billion). Excluding the Alibaba stake, cash holdings and partial ownership of Yahoo Japan Corp., Starboard valued Yahoo's core business at about US$2 billion.
Ms Mayer has been adding services for smartphones and tablets, new tools for advertisers and media content in a bid to attract audiences and marketers. Yet Yahoo has lost advertising market share in key areas such as mobile, where rivals such as Facebook Inc. and Google Inc. have gained ground.
In October, Yahoo said it would update shareholders with a new strategic plan for the post-Alibaba era during its next earnings call, which is expected in January.
She's also lost several executives in recent months, including Jacqueline Reses, Yahoo's chief development officer, who had shifted her focus this year to the Alibaba share sale. Rob Barrett, who led media strategy, also departed, Re/code reported last month, citing sources it didn't name. Kathy Savitt, who had been Yahoo's chief marketing officer, left earlier this year.
Yahoo's core business could be worth about US$1.9 billion, not including about US$5.8 billion in cash expected at the end of 2016, along with some growth assumptions, Brian Wieser, an analyst with Pivotal Research Group, wrote Tuesday in a note.
"Realizing value is far from assured," he said. "Yahoo's core business is in seemingly permanent decline." The November letter from Starboard referred to "numerous conversations and meetings" held privately with Yahoo in the past year, and the activists' growing frustration with the company's reluctance to adapt its plans as Yahoo's shares - and Alibaba's - have declined.
Starboard doubled its stake in Yahoo in the third quarter, after earlier selling part of its holdings. The investor - one of the most prolific U.S. activists - typically targets small- and mid-cap public companies it considers undervalued, pushing executives and directors for changes such as unit spinoffs and asset sales.
Yahoo is planning to complete the spinoff of its Alibaba stake, now worth more than US$30 billion, by next month, Ms Mayer said on the company's third-quarter conference call in October - - later than a prior target of year's end. She said the transaction would let Yahoo focus on markets where it can make an impact.
"I have very aggressive expectations for Yahoo's core business," Ms Mayer said on the call. "We have the right talent, the right strategy, and the right assets to drive long-term sustainable growth for our investors."
The prospect of the US Internal Revenue Service taxing the Alibaba transaction also has weighed on the stock. Even though the IRS declined to give Yahoo an advance ruling blessing the deal, Yahoo's board authorized the spinoff in September.
While the agency is stepping up scrutiny of such transactions, the company is going forward with the plan, which was announced in January, after the IRS indicated any decision isn't likely to be retroactive.