Marissa Mayer Defends Yahoo Strategy
The chief executive of the Internet pioneer said that Yahoo is coming from a position of strength in its plan to listen to offers, shed assets and lay off 15 percent of its workforce.
SAN FRANCISCO — It is game on once more for a potential Yahoo deal — maybe.
In acknowledging that it is exploring “strategic alternatives,†which is Wall Street’s favorite way to say “putting itself up for sale,†Yahoo finds itself in a familiar place. In 2008, Microsoft tried and failed to buy the web company.
Three years after that effort, as activist investors like Daniel S. Loeb hovered, speculation ran wild that the company might get sold. Then competing groups of investors prepared for the chance to buy a minority stake in Yahoo — only to see that opportunity disappear.
Now it is 2016, and Yahoo is reluctantly weighing a sale of its core Internet operations as hedge fund activists like Starboard Value once more criticize the company’s management.
It is clear that Marissa Mayer, Yahoo’s chief executive, would prefer her own self-help plan of cutting costs, businesses and employees. Both Ms. Mayer and people close to the company have said that the current focus on a so-called reverse spin, where it would spin off into a separately traded company Yahoo’s core business along with its stake in its Japanese affiliate, makes the most sense.
Timeline
Milestones in Marissa Mayer’s Tenure as Yahoo’s C.E.O.
As Yahoo’s chief executive, Ms. Mayer has acquired more than 20 companies, but is now facing a spinoff of the company’s core business in an attempt to rejuvenate the once-dominant Internet giant.
But pressure from Starboard and others have finally forced Yahoo into weighing alternatives in the name of getting the most for long-suffering shareholders. In the company’s words, it is leaving no stone unturned.
The company’s announcement on Tuesday sought to make clear that it would consider “qualified strategic proposals†— language aimed at preserving whatever negotiating leverage it can with potential suitors. That may be difficult, given how stagnant its stock has been over the past decade.
Public market investors still assign no value to Yahoo’s core Internet operations. The company’s stake in the Alibaba Group, the Chinese e-commerce behemoth, alone comes to about $26 billion, or virtually all of Yahoo’s current market value.
But clearly what remains — including Yahoo’s mail, sports, finance and search operations — has some value, a point that both management and investors agitating for a sale have argued. The company says that earnings before interest, taxes, depreciation and amortization for its core units should amount to $1 billion.
Verizon Communications, often mentioned as a likely suitor for Yahoo, valued AOL, a similarly stagnant business, at roughly 7.5 times Ebitda in its $4.4 billion takeover of the onetime Internet giant last year. Analysts and investors have speculated that putting AOL and Yahoo together, a combination dreamed of for some time, could yield advertising efficiencies that could compel Verizon to pay up for Yahoo.
Both corporate suitors and private equity firms have expressed interest in a potential deal, as varied as Verizon, TPG Capital or Bain Capital, according to people briefed on the matter.
But it is early days yet, with several potential buyers cautioning that their plans are in the preliminary stage. The slowdown in the debt markets may put a dent in the ability of private equity firms’ ability to buy Yahoo, though bankers said that the company’s relatively steady revenues would support the financing required in a leveraged buyout.
Yahoo may yet forgo a sale, at least if it had its way. It certainly has the experience in doing so. The trick now will be in convincing shareholders that sticking to its plans will pay off in a way that an outright sale will not — an argument that may be harder to make with irate investors prepared to wage battle once more.
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