Yahoo Board to Weigh Potential Sale of Internet Business, Sources Say | Hacker News Reader

Yahoo Board to Weigh Potential Sale of Internet Business, Sources Say

wsj.com

118 pointscoloneltcb135 comments

Let's say the first domino falls and they decide to sell. Next Google buys them and converts all Yahoo! search traffic to Google search traffic. That leaves Mozilla in a really odd spot. Most of their revenue comes from Yahoo! so they would eventually have to either go back and make a deal with Google or move over to using Bing as their default.

Search engine competition gives Mozilla an upper hand at the bargaining table, this could be not great for them.

Wouldn't such a merger be prevented by anti-trust laws or something?

I don't know. I'm not a lawyer.

Neither do the lawyers, usually.

http://www.unclaw.com/chin/teaching/antitrust/herfindahl.htm

disclaimer: recovering attorney who studied this in law school long ago. no longer practicing.

Google would likely avoid something like this I think seeing as they're already under anti-trust scrutiny.

I would have to assume that any deal currently held by Yahoo would have to be upheld or compensated for if they sold to a third party. That's a contract and those just don't go away quietly.

As for one less search engine, true it might be an issue. But I'd rather they went with DuckDuckGo than Bing. Seems more in line with their stated philosophies.

I'm sure in the short term they would be fine, but when they need to renegotiate their contract eventually and then they'll be dealing with Google.

The organization that most of us know as Mozilla is heavily dependent on the revenue brought in by their search bar. They know this and are trying to diversify (ads in the browser, third party integrations like pocket and hello). I don't know how much DuckDuckGo could spend on a contract with Mozilla, but I doubt its near how much (previously) Google and Yahoo! have spent.

That is true. But Mozilla had a deal with Google before, I'd be curious as to the reason Google would not do so again.

> Activist investor Starboard Value LP last month called on the company to halt its Alibaba spinoff and instead find a buyer for its Internet business. In a letter to Yahoo, Starboard said its position changed following the federal government’s decision not to rule on whether the Alibaba spinoff would incur billions of dollars in taxes.

Does anyone know anything about Starboard Value LP? What is an activist investor? The term itself screams adversarial. Do all CEO's have to deal with this? I can't imagine having to both plan how to pull a company out of the water and have to deal with people outside of the company who think they know better.

I am well-aware of Starboard Value LP. The hedge fund is behind combination of Office Depot and Staples, changes at Olive Garden, etc. They are activist investor typically acquire influential stake in small-to-midsize company, take board seats and try to push changes that may increase shareholder value.

I personally don't hold anything against them. They seem to go after management who get too comfortable in their role. Activism seems to be the primary way now hedge funds create Alpha.

A Primer on Starboard, the Activist That Pushed for a Staples-Office Depot Merger http://dealbook.nytimes.com/2015/02/04/a-primer-on-starboard...

Starboard’s Olive Garden Slides: Salting the Water, Custom Straws and More http://blogs.wsj.com/moneybeat/2014/09/12/starboards-olive-g...

Thanks for sharing

"Activist" typically refers to investors who try to either obtain enough shares, or sway the votes of enough shares, to get seats on a company's board and enact a specific agenda they want. It's often used pejoratively to refer to investors who want to gain influence just long enough to reap a profit from gutting the company, leaving other investors with now-worthless shares in the husk they leave behind.

Sometimes a company's parts are worth more than the company, and "parting it out" like one would an old car is the right thing to do.

Unfortunately for the employees, they aren't considered in the calculus of "value".

Are you sure? Many companies and divisions are bought by other companies to get the employees, dubbed an "aquihire". This happens when the employees are worth more than the book assets.

Another tactic is to split the company into a profitable and a non-profitable portion and then let the non-profitable portion preferably loaded up with a bunch of debt sink. This ought to be illegal but it's a recurring pattern.

Why should that be illegal?

Because it allows you to externalize corporate problems to the detriment of employees and creditors rather than to actually deal with them.

Depends on whether the company's parts are worth more than the company now versus the future of the company. Someone looking to make a quick buck probably doesn't care that a long term strategy would net much more money over time than a quick sale. Such that, why wait ten years for ten million dollars when one can have two million dollars now? Totally depends on the company, much like your car analogy, and it may not be the right thing to do. But I suppose what the right thing to do may depend on the person you ask.

2m into 10m in 10 years is a 17% annual return, pretty darned attractive. A company with such prospects is worth much more than 2m selling to someone else.

That's completely true, and my point. It's just that some people don't agree with that train of logic, they want the quick cash now.

People with that kind of money tend to have financial good sense. Even if you don't want to wait 10 years, for 17% returns you can sell it today for much more than $2m to someone who will.

An Activist Investor is an investor who purchases a not-insignificant stake in a company in order to pressure the board into making a decision that will make that investor a lot of money, generally in a very short period of time. The high-profile investors tend to want to shutter the company completely or to downsize immensely. Basically gut, maximize profits for a quarter or two, and sell.

Biggest example is probably Carl Icahn. He's well known in the tech world for trying to do these types of things to Apple, Netflix, and Dell. Not sure about the others, but Netflix actually has a Carl Icahn rule that prevents any one investor from gaining too much control. If I remember correctly, Icahn sold his stake almost immediately after the rule was put in place.

Netflix adopted a poison pill (http://money.cnn.com/2012/11/05/technology/netflix-poison-pi... - more professionally labeled a shareholder rights plan) to prevent Icahn from getting too crazy; he was basically threatening to make Netflix acquisition-bait. Icahn recently sold off his Netflix stake, but managed to make a ridiculous amount of money as the company saw some solid growth while he held a position.

Back in the 80s, they were called by the term "corporate raiders". The movie Wall Street (a classic, unlike the dismal sequel) is all about them.

https://en.wikipedia.org/wiki/Activist_shareholder

http://www.bloomberg.com/research/stocks/private/snapshot.as...

Yes, basically all public company CEOs have to deal with this, especially if their share prices are not going up.

If that sounds onerous to you, then don't become a publicly traded company.

Other comments already explained what an activist investor is. It is adversarial...but that is the price to pay if you want to be a public company. If a company wants to raise capital from the public, they then need to deal with shareholders, especially large shareholders' wishes. If they dont want that type of noise, they can stay private.

The activist investor wants what is best for the stock, so it is not necessarily bad. It can be bad though if they only want a short-term pop in the stock, instead of a longer term growth plan.

people outside of the company who think they know better

They're called "owners", and despite the best efforts of managerial capitalism to transfer power entirely to the executive officers they do get a vote on what the company does.

they are called late minority holders.

they are the ones that bought stock yesterday, on a company that do not pay dividends, making the long term holders foot all the proverbial bill.

Just because those recent minority holders are a little more vocal than all the long timers minority holders do not make them more of a owners. In fact, we should have things in place to make them less of. that would probably reduce the value of companies for later sells. but would make investing in companies what it was supposed to be about. before the banks took all the fun away.

Reminder: in 2008, Microsoft offered to buy Yahoo for $45 billion, and Jerry Yang turned them down. Whatever they get for the core business (which, as jonkee says, the street thinks is worth nothing), I'm guessing it's going to be a lot less than $45 billion. something something looking a gift horse in the mouth.

Hindsight is 20/20.

Exactly. Google has had similar offers...

Actually, Google was the one trying to sell itself to Excite. For $1,000,000. A board member talked the founders down to $750,000. CEO of Excite said no. It's now considered near the top of the list of worst decisions ever made by a CEO.

I dunno though: was Excite even capable to let the Google-that-was turn into the Google-that-is?

I can almost guarantee you that if the deal went through then very few would know what Google is/was. Unless there was a brand change at the outcome of the deal. Even then, it wouldn't be the same.

His question was asking if Excite would have used Google's technology in such a way that they'd become what Google is today. There's no way anyone would know "Google" because Excite wasn't going to re-brand to a no-name.

Exactly. Not only that, though, was Excite capable of building the culture which Google had/has, which (I believe) is one large reason it became what it is.

probably. the world only needed to decide on one search engine. it happened to be google.

after the world set (for google, thanks more for universities putting search boxes on their sites, more than algorithms) they could do absolutely anything. launch free email with 1gb? disregard ads and only allow text ads?

they did everything wrong by the book and are still huge. So i doubt excite could have screwed it up. well, they could have screwed the university fan-base... but that is about it.

Is Search _really_ so positive-returns-to-scale that only a single player can exist?

I mean, yes, Google's percentage of total Web search is embarassingly huge (north of 80%, or is it 85%, last I checked). But the user lock-in is slight.

Advertiser lock-in is where I strongly suspect the action is, where Google offers both networks and tools which appeal to online ad buyers in a fashion that's difficult or impossible to match.

I doubt it. For example, Excite already had an e-mail product, so I can't see them creating Gmail.

I don't even think of this as hindsight. At the time of the offer, everyone I knew at Yahoo was incredulous, because the org seemed so dysfunctional.

It felt like there were a few years lost, spent just injecting and removing tiers of middle managers.

It's okay, at least Microsoft still got their chance to burn money on Nokia.

...so much money...

Offshore cash, same as the Mojang acquisition, practically funny money given the ratio of how much of it it's possible to keep when repatriating it to the US.

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

-- Judge Learned Hand (1872-1961), Judge, U. S. Court of Appeals

That quote is annoying to spam in general, more so when it isn't even relevant.

It's not sinister per se, it's just silly. And I'd say it's roughly 50/50 the fault of corporations and of the US government setting tax policy weirdly.

Microsoft could've bought 6.5 Nokias for $45 billion

Or ~1 Nokia for what it was worth before Stephen Elop ran it into the ground.

(I don't buy the conspiracy theories that Elop was a Microsoft mole sent in to do exactly that. I never attribute to conspiracy what can be attributed to staggering incompetence)

Well, the Alibaba part is worth $30b+. Yahoo Japan another $10b. So the world's third (or 4th or 5th) largest internet property would only need to be worth $5b to "break-even". Thanks for the reminder!

It's only worth that if somebody pays that, which would be who in this case?

I wouldn't touch an Alibaba investment with a ten foot pole, at least not on any medium- to long-term basis. They would be smart to sell that off.

Why's that?

Why is Yahoo Japan worth so much?

Because Yahoo Japan is pretty popular in Japan, and they offer a lot of relatively successful services.

Not that it's ginormous, but for example, eBay never really happened in Japan because Yahoo Auctions was already a thing.

Yahoo Japan also runs an ISP

Revenue for the fiscal year ending 3/31/2015 was ~$3.5 billion; EBIDTA $1.8 billion. 70% attributable to advertising. Like most large Japanese Internet companies they have a bit of an empire building complex going on, and do everything from running the local equivalent of eBay to selling ISP service.

Yahoo Japan is a different company from Yahoo Global, and they offer tons of local domestic services. They even run the equivalent of Ebay in Japan (ebay does not operate in Japan).

Same in Taiwan, where Yahoo has cooperated and merged with local businesses and still is (as far as I can tell) a household name for auctions and their webmail service (as Yahoo!奇摩).

Interesting, so Yahoo Taiwan is independent from the mothership as well ? Is it still popular there?

No, Taiwan is part of the mothership.

A bit of googling suggests that it is still popular (I've seen it mostly as a browser homepage) - http://www.insightxplorer.com/ix/news/news_07_27_15.html

But Taiwan only has ~23m people vs Japan's ~130m...

Yeah, that deal would have been great for Yahoo and terrible for Microsoft. It's funny how history works out.

Microsoft has probably burned in that neighborhood to get Bing to where it is now, they probably would have been better off if they had been able to close that $45b deal.

They burned a lot of money for sure, but close to 45 $B? No, probably not.

Having no citation or inside knowledge, I can say for certain they did not spend $45 billion to develop, market, and grow Bing.

That's an unreasonably high estimate, and there is some data to support the idea that it's unreasonable[1].

Microsoft has been losing, at most, a few billion[2] a year on Bing. Assuming they've spent $45B since 2009, that's $6.4B per year spent on Bing. A net loss of $2B on Bing would mean Microsoft is making $4.4B per year, which isn't in the ballpark.

1. http://www.businessinsider.com/chart-of-the-day-microsoft-on...

2. http://hal2020.com/2013/01/18/about-that-2b-annual-loss-from...

Even if the real number is only in the $20-30B range I'd still consider that "in the neighborhood" as I said. And they would have had a much stronger start by not having to build a brand from scratch.

I take your point, but I want to add a couple more things.

Buying a company costs a lot more than the purchase price. Due diligence, regulatory compliance, legal expenses, HR expenses, lost productivity due to changes, employee turnover, and other factors put a huge premium on top of that price.

Plus, a company that you buy has its own cash-flows, assets, and liabilities, and those might be costly, too. It's not always a good idea to buy a ship that's slowly sinking.

I think Microsoft has done incredibly well without Yahoo, and it's also using Bing in interesting ways that don't require direct competition with Google (powering Cortana, for example).

You forgot break-off risks related to the buyer.

Generally, acquisitions are a good deal in monetary terms, but that's really not what companies are looking for at the time. Remember, the thing that got these companies to that spot are not an affinity to sell to another.

Reminder: Yahoo invested in Alibaba in 2005.

here's the reason why every six months you read this same headline:

previous yahoo investors invested with almost zero dividends. that means, yahoo kept all its profits.

now yahoo is still profitable, it's just not growing as fast as the competition. those money reserves are still in the bank.

new investors think they can just pony up a few dollars for YHOO shares, pay a magazine to say yahoo is worth nothing, and convince the board to force a sale.

that would then expose those big money reserves to the current holders, giving them instant huge profits for nothing.

and this is the reason you see that every six months.

They have a robust delivery platform. I have no idea why they don't hire a notable CEO and entertainment team snatched from the entertainment industry and start producing content like Amazon.

Upvoted.

Because Amazon. (And Google, Hulu, Netflix...) You don't break into a mature market unless you have money to burn.

They own a huge marketing channel. You need some money and to fund just a few good producers to get the ball rolling.

Oh maybe they should bring back a beloved show shot down by networks.

Has anyone actually used yahoo screen?

Yahoo! Screen revived NBC's Community sitcom for a sixth season, but lost a lot of money:

https://www.yahoo.com/tv/bp/community-season-6-yahoo-2046126...

I wanted to, and tried to use it to watch the new season of Community that they made. Thanks to region locks, dated technology, ads, and a generally awful website, I gave up.

They tried and lost millions.

That was the Terry Semel tenure as CEO, right? https://en.wikipedia.org/wiki/Terry_Semel

Nope, more recent than that. Yahoo Screen, including the sixth season of Community.

It didn't really help that no one outside of the US could easily watch season 6. I'm a huge Community fan, but Yahoo Screen just didn't work for us. In the end, season 6 was on TV, but a lot of people had just pirated it.

Yahoo Screen could've worked, but in terms of execution it was terrible. It seems that Yahoo really haven't improved in that regard.

Nope. Marisa. Terry couldn't even do that! talk about a failure.

Is there any evidence that Amazon's original programming is anything more than a loss leader to sell Prime subs and increase the amount of stuff people buy through Amazon? Loss leaders only work when you have some sort of gain follower to go with it.

(And they DID try this, with Community and Other Space.)

I am sure it did lose money but the series is still an asset, much like rental property. Breaking Bad, The Shield, Mad Men will be making money for years in streaming, syndication releases, and whatever technology is next. Breaking Bad and The Shield cost more than the advertising dollars brought in but they are profitable now.

They did stream an NFL game this season (exclusively) so they still try this every now and then I suppose. It was one of those "odd times in the US" games held in London iirc. I wonder how that game worked out for them/what the internal goals were.

Its worth noting how well received this was. Fan sentiment seemed very high at the experiment, noting crystal clear quality and minimal buffer time. It was reported that all advertising spots had been sold too.

Yahoo has already done almost exactly that and had to write off $42 million in October when their original content effort failed.

http://variety.com/2015/digital/news/yahoo-misses-q3-earning...

Nice to have a board that leaks like a sieve.

Agile board!

Move fast and break stuff...

Can't be worse than HP board

Possibly. But this is a bad sign for Marissa Mayer, if the board is acting out-of-order like this her days are probably numbered, it's a sign of pretty strong dissent. Someone (or multiple someone's) is trying to force her hand.

There are a lot of stories implying that she's lost a lot of confidence. C-levels/VPs, including those she brought on, leaving for reasons that include lack of direction. Low morale amongst employees which has resulted in outcries against managers. And then of course her strategic decisions have not yielded growth.

After multiple CEOs in the last few years, it would be interesting to hear an impartial insider's analysis on what went wrong. Marissa Mayer came with decent creds, a sizable runway and support from both the board and employees alike (at least in the early days). Why is she unable to make any progress? Was it just a better support circle @ Google or just unlucky and bad decisions?

This is the third #nottheonion article today. "Ford considers selling off car business".

Where did your read that? It would be really huge news here in Michigan.

I think the joke is "isn't that all they do?"

Obviously it's not true for either company. Like any corporation that big the revenue sources are diverse.

Well in the case of Yahoo I think that it is only a matter of time. You could buy Yahoo, sell the shares in Yahoo Japan and Alibaba and end up with Yahoo for free and have a couple of billion dollars in the bank to boot. This is a takeover artists dream deal.

It's interesting that they are talking about the Board directly and not Marissa Mayer. Is it common for the press to do so ? Isn't the CEO like the spoke-person of the board of investors ? Why would the board side step the CEO that way in the media ?

> It's interesting that they are talking about the Board directly and not Marissa Mayer

They're talking about something the Board, and not Marissa Mayer, is doing. Marissa Mayer is not deciding these things. There's no reason to bring her up.

> Is it common for the press to do so ?

It depends on the situation. If the Board is doing something, the media talks about the Board. If the CEO is doing something, the media talks about the CEO.

The first confusing exception is when the CEO owns most of the company, which makes the Board irrelevant. This is the case with Facebook: Mark Zuckerberg owns the majority of voting shares, so he has absolute control over Facebook. The Board has no power to overrule his decisions as CEO.

The second confusing exception is when the CEO and Chairman of the Board are the same person. This was much more common in the past.

> Isn't the CEO like the spoke-person of the board of investors ?

No, unless the CEO is also the Chairman of the Board. The CEO can have very conflicting opinions and actions compared to the Board.

> The CEO can have very conflicting opinions and actions compared to the Board.

Which usually does not end well for the CEO.

Wall Street was valuing the web businesses as worthless so this should be interesting (Yahoo's total market cap was about equal to its remaining stake in Alibaba). Shares are up 5% after hours on the news.

Actually many times Yahoo had negative valuation (ie: Yahoo market cap was lower than Yahoo shares in Alibaba, thus if you discounted Alibaba value, Yahoo had negative value).

They have a lot of employees to feed with a dying web property.

There are still big tax issues with the Alibaba stake so that definitely has something to do with it. If they can get it to be a tax free spin off the value should increase quite a bit.

Or just as not worth more than the trouble they're bringing to this whole ordeal, when viewing it all as a portfolio of assets. (referring to the core biz)

The most stupid decision was to stop their own search engine based on Hadoop (Yahoo run the largest Hadoop cluster ~ 2009). Nowadays Yahoo could run their own cloud hosting platform, etc.

Stupider than deciding to shut it down and outsource to Bing was outsourcing and not shutting it down. (outsourcing to Microsoft was a poor decision as well: Microsoft did about as well for Y! as Y! did itself with less flexibility; but outsourcing to google again was nixed by regulators)

Search still is a significant source of revenue and growth for them.

1. http://adage.com/article/digital/yahoo-s-display-search-reve...

What are they without the "internet business"?

Compelling investments in Alibaba and Yahoo Japan.

Yes, but what's the point of existing?

Sell the investments, return money to all shareholders. Bye bye Yahoo.

The investments would be the point of Yahoo existing, the company would just be a stakeholder of other companies.

If they sell the investments they have to pay taxes on the gains. These tax issues are the driving force behind everything going on at Yahoo right now.

"little more than a holding company for its Alibaba shares."

via http://www.theverge.com/2015/12/1/9832780/yahoo-considering-...

The idea makes a lot of sense, but why can't Yahoo! simply spin off their core business? They ran into troubles spinning out the Alibaba stake, but spinning themselves out would split their valuable Asian assets from their core business, which has an implied negative valuation. Would the IRS frown upon them leaving behind what is effectively a holding company?

What I can't understand is why they already spun off Yahoo Small Business to the holding company for the Alibaba stock, Aabaco. https://www.aabacosmallbusiness.com/

I've always thought of companies as mining a local maxima of their solution space.

Whatever you say about Yahoo! They are extraordinarily successful at extracting the maximum revenue for display advertising. I'd let them sell display ads for me.

oh no! please keep yahoo yql finance api up and running! i need that data feed

Yahoo Finance is the only reason I ever go to Yahoo. I feel like they could beef up their finance news and products and do something with that.

Bah paywall.

scroll to the top and click 'web'

Yeah, thanks. I was impatient last night. :-/

open it in incognito mode

Steve Ballmer will buy Yahoo after all.

Goddamnit, time to migrate everything off Flickr. Anyone got good alternatives? I only need ~50GB of space.

Mega.nz works, for free. YMMV.

You never know. Perhaps flickr will end up with someone who will run it better.

Or Google will buy it, loot the customer data, and close it down.

They were actually doing pretty well at New-Yahoo, except for when they removed Google login support and I ended up with 2x Yahoo accounts and can't move my Flickr amongst them.

I've been really happy with 500px. Their interface is quite pain-free to use. They're more geared towards photographers looking to host their portfolio

I'm having issues with both the philosophy and more, the forced square cuts of 500px.

Also: http://www.naturephotoguides.com/blog/photo-consumption-conf...

I agree with the popularity aspect being sort of a pissing contest. As for your concern regarding the forced squares--I assume you're talking about the layout of portfolio photos--they seem to have moved away from that a bit, with wide landscapes being more reasonably displayed. They actually updated a bunch of their UI as of late. It's not the ideal service but unfortunately I don't know of any other options that are much better overall as mentioned in the piece you linked.

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