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This is cleverer than people are giving them credit for. It delivers immediate value to shareholders; it delivers opportunities for long term growth to shareholders; it creates one valuable Asian property that can acquire other properties and continue to deliver shareholder value; it creates a US company that is easier to acquire than it used to be, without the Alibaba share, and thus could be bought by a big media company that values all the core assets and will keep the engineers.

Everyone wins here. Managers win, of course, but shareholders, who have been patient, get short-term returns and the potential for long-term ones as well. Employees will see their jobs stay, because of this repackaging.

Yes, Mayer will be gone in a year, replaced by someone with experience selling a company. But it's been a good run. She turned Yahoo from a place with mediocre engineers into a decent place to work; she resuscitated existing brands and gave them a place in the world; and now she did some reasonably clever financial engineering.

Did she? Maybe I'm a bit more sceptical, but what did she actually achieve?

1. She failed at putting Yahoo back on the map. She spent billions on acquiring businesses that bring in close to no revenue. Maybe it's a great place to work, but if there's no money coming in, it won't stay great long.

2. She failed at financial engineering; she couldn't even get a tax free spinoff through.

I would've been happy to cut her some slack if she did one of these things right, and messed up the other one. Some people aren't meant to be product people and others just aren't financial engineers. But this is basically throwing in the towel.

Don't forget, this idea of a reverse spinoff didn't come from Marissa. It came from an activist investor, who are basically, master financial engineers.

I think you're being too harsh on the revenue side: they make a ton of money. They may not be growing that at the desired rate, or in the right markets, or be appearing to be innovative (or being actually innovative), but Y! has a ton of cash flow.

When Mayer took over, they had no ability to attract or retain any kind of tech talent. Now, they can do so at the same rate as any other ad company. That's a big change.

She didn't hit it out of the park, but she's delivered her shareholders a solid double.

> 2. She failed at financial engineering; she couldn't even get a tax free spinoff through.

She managed to keep a part of Alibaba stake. This reverse spin off will also be tax free.

She's throwing the company away she is currently CEO of.

The BABA stake had to be separated from Yahoo, but this is literally the worst possible way, aside from selling the shares + paying taxes, to achieve this.

What's so bad about it? The end result is the same as the original plan - one company with a stake in Alibaba, and another company with Yahoo's core businesses and the Yahoo Japan stake.

It's reminiscent of the endgame at HP, where the formerly profitable PC/printer division has been split off from Enterprise - possibly in an attempt to keep at least one afloat.

That's not proof of badness, but it does suggest desperation and lack of imagination.

> It's reminiscent of the endgame at HP...

It's completely different. Yahoo is not splitting up its core businesses.

They're taking a non-core asset (the Alibaba stake) that they can't sell without incurring a huge tax bill, and separating it from yahoo Core so that they can hand it over to Yahoo's shareholders (presumably in the hope that someone else - e.g. Alibaba - will step up to acquire it, thus unlocking the value for the shareholders), and re-focus on Yahoo's core businesses again.

There is a separate issue that the core of Yahoo is performing poorly, and that fact may well result in Yahoo Core being split up and sold off but it's important now to conflate the two issues.

They're looking for a buyer of the Yahoo spinoff, it's not going to stay independent. It will probably to be bought by vulture capital firms. Yahoo is basically dead.

> They're looking for a buyer of the Yahoo

Board feels Yahoo's core business is undervalued. The spin off will help clear the picture of how much Yahoo's core business independently value.

They are not looking for buyers (unless someone has a offer they can't refuse).

Too early to say that. They are not looking buyers, until the core business spin-off get priced reasonably, by the market.

Maybe they rename Yahoo "Aabaco" and the spin-off, Yahoo.

I don't follow your logic. That's like saying the new manager for the department store managed to keep the roof of the store intact while losing everything under the roof.

It depends on the condition of the roof. If the manager manages to keep it up long enough to liquidate and get some value from the merchandise that would be lost in an imminent collapse, then that's a level of success.

She had nothing to do with coming up with the financial engineering. From the article itself it says the hedge fund Starboard Value came up with the move and has been pressuring the board to do it for months.

The obvious question is, if it is so clever, why is it plan B?

Plan A, while fairly conventional, got shot down by the IRS.

http://www.bloombergview.com/articles/2015-09-09/yahoo-s-ali...

So, the magic plan failed and now they are going with a real plan?

If I understand correctly, companies used to be able to spin off large amounts of shares tax free by bundling them with tiny segments of their business. The IRS used to let companies ask "did we do this right?" but this time instead of saying "yes" or "no" they said "we won't answer questions like this any more and we want to rethink our rules" which is still in progress.

So if the above is roughly accurate it's more like the loophole everybody used is closing and now they're going with a less desirable loophole.

Losers are the web market in general which loses a big independent competitor, internet users which will see products shuttered or neglected, and the upcoming laid off employees. All because greedy shareholders didn't want to pay their damn taxes.

What core assets are those? Yahoo seems like Real Networks: a former big name that continues to exist (and get press) for no reason beyond inertia. It's not clear to me that it actually does anything worth paying for at this point.

Just to list a few of the valuable properties off-hand: Homepage, Mail, Search, Tumblr, Flickr, Finance, News, Sports, Fantasy sports (including daily fantasy). Some of the bigger ones are billion+ dollar properties. Others are hundreds of millions.

> It's not clear to me that it actually does anything worth paying for at this point.

Few users of Google and Facebook actually "pay" for those services, they're primarily all advertising funded companies.

In what sense are they billion dollar properties?

I didn't mean that users would pay for them; I meant that I don't see how one could use them to make money, or at least enough money that it would be worth bothering to acquire them.

Mail is the #1 e-mail provider.

News is massive.

Sports is massive and has one of the top Fantasy operations, a growing market.

Homepage is still the homepage for people who set homepages.

All are monetized through one of the most effective ad selling operations out there.

This is news to me. I suppose it is because I now move into more restricted Internet circles (not so much time to waste as I used to have), but I haven't visited anything Yahoo!-related since 2004? 2005?

Glad to hear they still have a following. I thought GMail and Hotmail were bigger than Yahoo! Mail but what do I know!

"Sadly this probably means 3 things are going to happen in the next 6 months"

(Genuine question, not snark). Why "sadly"? Companies, even technical companies, get obsolescent and die all the time. Maybe it is just Yahoo's time to go.

I can't speak for chollida1, but for me as an "older millennial" (28) Yahoo was how I came to discover the internet.

Between the chats, instant messenger, search before Google, multiplayer games online with strangers (albeit simple ones like chess and poker), and Geocities it was my first taste of the types of things I do online to this day. I think it's okay to mourn a bit for how we remember the company.

As an even older millennial (35), I have very fond memories of Yahoo.

I remember receiving a two-disk copy of Netscape Navigator from a local ISP at a computer show in early 1995 and setting the home-page immediately to Yahoo. At the time I remember seeing hard copies of "The Internet Yellow Pages" at the local Barnes and Noble, but most search was through Yahoo or Alta Vista. Back then AV had several fewer orders of magnitude web pages to crawl and SEO/spam hadn't yet taken off, but even still the AV results weren't always useful. Without page rank or a decent sorting algorithm, I remember often going through pages of results.

Yahoo had it all: games, continuously updated stock quotes (at a time when I would look up share prices in the morning's paper, priced to the nearest eighth of a dollar), weather, news, and hand picked results from around the web. It was all I was previously getting from CompuServe/Prodigy, but at no cost.

But now I haven't visited Yahoo in years. It's like when your favorite teenage band breaks up. You're a little sad, but you've moved on. The fond memories are for life.

Edited to add: we all used a home page back then because tabs hadn't yet been invented, meaning the restore previously opened tabs option that we all use today also didn't exist. One's home page had a much greater importance back then.

I'm a young millennial and even though Google was more or less my first search engine/portal (I used Alta Vista until my 1st grade teacher showed me Google around '99) I also have fond memories of Yahoo!.

I won a Final Four bracket against high school classmates on the site's fantasy sports page and knowing nothing about college basketball. I made $150 from that.

Even though they clearly made strategic mistakes and Mayer's revival may have been too little too late it's still sad when an "old-school" tech firm goes under, especially one that touched so many lives.

1st grade teacher, 1999. God, I'm old.

I remember using AltaVista and finding it really useful. I had a mail account with them. They shut it down.

I miss discovering new search engines (Lycos, Lycos FTP Search, Dogpile, this new one with a stupid named called Google). I didn't use Yahoo! heavily at that time but I did use Geocities pages alot (before they were bought).

Where are the rainbow horizontal rulers now, eh? And marquee tags? They should make a comeback.

Well said.

This is my Nokia heartbreak all over again

I'm 41 -- I have always detested yahoo's clutterly, ugly start page.

I gave up Yahoo mail years ago.

The only thing I ever went to glance at was finance.yahoo.com -- because it seemed to be the literally only page that you could gleen info from yahoo in a split second...

Fwiw, stocks were all priced in 8ths. A few remain that way today. But the newspaper quotes are still a quaint memory regardless.

You can't be a 35 year old millennial, sport. Generation Y for you.

Wikipedia claims Generation Y = Millenials... sport

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

Hey, it's ok, you can both be wrong :)

1979/80 would both put you in Gen X as a birth year ('61-'81, although Harvard for some reason thinks '64-'84 - either way, bad luck, Coupland novel it is).

Thank god Harvard has taken a stand

> As an even older millennial (35)...

cough

Dude, give up the skinny jeans :)

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

"Generation X, commonly abbreviated to Gen X, is the generation born after the Western Post–World War II baby boom. Demographers and commentators use birth dates ranging from the early 1960s to the early 1980s."

I have variously seen the upper boundary for Gen X as 1976, 1979, and 1982. Having been born toward the end of 1980 and comparing myself to those born in 1970 and 1990 (squarely in the middle of their respective generations), I find myself having far more in common with the latter. Hence why I consider myself a millennial.

But never will I give up the skinny jeans!

The Strauss & Howe definition, which I find most useful for cultural purposes, puts the line between '81 and '82.

With that said, it's been my observation that people born within a few years of the line in each direction -- as far as '77 to '88 -- tend to share the same values and have characteristics of both Millenials and Xers (born in '84 here, and I'll gladly apply that description to myself). I've also seen people, particularly those in the S&H community, use the term "Generation Y" specifically to refer to this cusp and not to Millennials as a whole.

Gen-X stereotypes tend to be more true for people born '76 and earlier, and Millennial stereotypes tend to be more true for people born '89 and later.

There are probably other things that play into the stereotypes but being born '89 and later maps pretty well to never really knowing a pre-Web and pre-Mobile world. A somewhat primitive version of it in their tween/early teen years to be sure but an online world nonetheless.

There's no hard generational boundaries. For what it's worth:

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

"Millennials are the demographic cohort following Generation X. There are no precise dates when the generation starts and end; most researchers and commentators use birth years ranging from the early 1980s to the early 2000s."

Someone 35 is on the bubble.

dude give up the pedantry: https://en.m.wikipedia.org/wiki/Millennials

"Millennials (also known as the Millennial Generation[1] or Generation Y) are the demographic cohort following Generation X. There are no precise dates when the generation starts and ends; most researchers and commentators use birth years ranging from the early 1980s to the early 2000s."

Soft clustering does a much better job of classifying people into generations.

Yes, those yahoo chess ladder rooms burned through a ton of dial up hours at my house.

Agree with the others re: our first experiences on the internet.

But even now Yahoo is still hanging on to some valuable things we're likely to lose in this change. I'm still a heavy user of Flickr for example - and though many others have tried, it's still IMO the best photography community out there (sorry 500px).

It's been a perennial money-loser for Yahoo, kept around because what self-respecting tech giant doesn't have a photo hosting service? I fear with this spinoff we're seeing the end days for that product.

I'll agree with flickr having a lot of good photography, but did they actually fix the community?

When I used it, all I remember is that 90% of comments were sparkling banners saying "YOUR PHOTO HAS BEEN AWARTED BEST FLICKR OCEAN SUNSET AWARD MAY 2010! CLICK HERE TO JOIN OUR GROUP! JOIN JOIN JOIN!" to the point where it interfered with anyone trying to have an actual conversation.

Which was a shame because outside of the enormous volume of spam they had a pretty good thing going.

I just tired of most of the community aspect of flickr aside from folks I already knew IRL. I found a lot of groupie-ism and, as you note, group stuff that was at least spam-ish. As with other things about flickr, I guess I'm not really sure what the "right" flickr looks like and how you achieve that at profitable scale. And, to be honest, I've never had a lot of interest in community photo meetings and so forth locally either.

True, I doubt it's possible to have much of a community at the scale that Flickr is aiming for. You can do it with a niche little photography site, but anything operating at mass-market sizes will eventually turn into a lot of people spamming groups and internet jokes at each other because that sort of behavior feeds on itself and gets you more active users to generate money from.

I hadn't checked it out recently, but it looks like they're still doing fine as far as having a ton of great photos posted. As long as the "community" aspects don't bug you, maybe it's a winning strategy?

OTOH I have no idea if they're profitable or not.

>I hadn't checked it out recently, but it looks like they're still doing fine as far as having a ton of great photos posted. As long as the "community" aspects don't bug you, maybe it's a winning strategy?

It's fashionable to bash on flickr because it's "languished" and, one redesign aside, hasn't moved a whole lot in a long time. I've certainly taken casual swipes at them myself.

However, the truth is that--while I can imagine some features I'd like--it works pretty well and has a lot of great photography. At the end of the day, it's entirely possible that I wouldn't like it if they were constantly taking the site in new directions because social or mobile or big data or whatever the current hype is.

Absolutely. There's a huge trend of websites redesigning and shuffling around just for the sake of doing it, and in the rare cases where you can still access older interfaces (I'm thinking of GMail here) it's totally arguable that the old ones are better. If you have a service that works well, staying the same is nothing to be ashamed of.

I haven't been putting any of my photography online for a couple of years now (aside from sharing to friends on Facebook), but the thought had cross my mind recently. It's a tossup between hosting them on my own site or going somewhere else where it can be "social" and more importantly, more broadly visible.

For me, flickr works because I can drag photos that I've processed in Lightroom to the jfriedl publishing service, hit publish, and they go up to flickr where I can share them or people can just stumble across them. I have no doubt the discoverability is better than if I put them on my own site and I do indeed have people contacting me from time to time to use a photo for something or other. (And doubtless, many uses that I don't know about.)

It's not a big thing but the very modest price, the low friction, and contributing to the commons in however small a way work for me.

Left for the same reasons - it was interferring with my photography. Around the same time, other services like Smugmug and Zenfolio got better (I think Smugmug is now a little more up to date than ZF's look, but not originally).

Flickr decided for a long time to not prioritize the best photo display possible and limited photo size and wouldn't offer things like black backgrounds.

And now I may get an infinite less number views, I don't have to deal with the comments, and photography is no longer associated with gamification (when do I post this for the most views to hit explore, etc).

Flickr has a bit of a "look" to what is popular, and while I'm big on good photo processing and the history of the dark room, what makes it today is often too processed, too HDR, and so on, and playing the "game" is not something I'm interested in.

In the early days of Flickr, people DID look more at all the photos in groups they posted to, and that was pretty great.

Getting more people into photography is great though - just shouldn't be about numbers.

Yeah, there was a lot of that, and the bigger groups are still like that to some degree.

But (much like Reddit) the smaller communities were a lot more sane. And (much like Reddit) it was easy to create new communities - groups with memberships in the dozens or hundreds were infinitely better and actually useful for getting feedback and sharing your work with people who gave a damn.

So, the mass groups were pretty shit, but there is a thriving mass of smaller communities there that are quite pleasant and useful. (Again, much like Reddit!) - and competing services largely haven't cloned this or offered an alternative.

500px doesn't do small niche communities - there isn't really a concept of a "community" besides "the whole userbase", and as a result commentary on photos there is exactly like the big Flickr groups - all noise.

Smugmug targets specifically portfolio hosting and presentation, which it does very well, but it has minimal social components.

The only service - oddly enough - that seems to have attracted small photography communities is Google+. Weird.

That's true, but just like when people die—even when it's their time—it can be sad. I haven't used Yahoo in months, but like my sibling comment, it was a large part of introducing me to the web and what was possible.

The past 4 years couldn't have been easy on her.

Isn't that why CEOs are paid the big bucks?

I mean, a Yahoo whose sole purpose is to be a tax-efficient vehicle for holding shares in Alibaba is not the endgame anyone envisioned, and let's be honest, doesn't really need a CEO either... Not that she ever has to work again.

CEOs get the big bucks because they are better than everyone else at taking credit for business success irrespective of how much control they actually had over the factors contributing most to those successes[1]. They've also been the most effective group at raising the baseline replacement cost of their position. This limits the amount that can be saved by booting a CEO for a cheaper option. So there's a feedback loop at play, when the business succeeds, the CEO gets a raise, and when it falters, market forces prevent the CEO from getting a pay cut (and often still seem to necessitate, or at least "justify", a raise in the face of declining business).

[1] I'm not saying that their impact is never high, but CEOs are paid as if it is always high, and that's essentially been demonstrated by economists not to be the case, particularly with large complex organizations.

A single point of failure can demand pretty much whatever it wants.

> 3) If Alibaba buys the holding portion of Yahoo( Alibaba and Yahoo Japan) then look for Alibaba to seek to aquire the rest of Yahoo Japan.

Isn't Yahoo Japan being spun off from the Alibaba portion? Ie. all that remains of the current "Yahoo" company will be its Alibaba stake.

You are correct according to the news reports I read. See 6th paragraph of this Reuters article for example:

http://www.reuters.com/article/us-yahoo-divestiture-idUSKBN0...

> then look for Alibaba to seek to acquire the rest of Yahoo Japan.

Yahoo! Inc doesn't own the majority of Yahoo! Japan (believe it or not), Softbank does. Yahoo! is only a minor shareholder of Yahoo! Japan.

This is not what article says. Previously they wanted to spin off Alibaba stack but because of tax issues now they will spin off other stuff. Either way, results would have been exactly same: Partition of company in to two. There is zero talks of selling of core business. In fact article clearly says that "activists" investors wanted that but didn't got it. Board says they are 100% behind Mayer and Mayer says she is deeply committed to running Yahoo. In fact she is taking only limited leave for maternity. I highly doubt you actually read article or may be you are just jumping to conclusions but without disclosure that this are your interpretation, not the actual content of the article.

Marissa Mayer is basically an ex-CEO walking at this point. As "bad" as it sounds, the only thing that has kept her around recently is her pregnancy. No board would want to step into the mess of letting a woman CEO go during pregnant or immediately following pregnancy and maternity, no matter horrible her performance. You are right, I give it about 6 months before there's an announcement of her departure for whatever reason, probably "spending time with the family".

As it has been put by others, Mayer will hold the title in corporate history as the most expensive CEO for a very long time.

Maybe it's the opposite. I feel like people seemed to like working at Yahoo while she was there...but no great new products...

I do hope they find a good home for Flickr...I will miss it terribly if it is gone.

Chairman and CEO have denied any plan for selling Yahoo. Their plan is to get a tax free separation of its core business from Alibaba. This reverse spin off according to them most likely to get the tax benefit. The other way - forward spin off too would have been tax free but that would have taken multiple years while this would only take 1.

Why is a wind down and/or sale of Yahoo more likely given a spin out of the core business vs a spin out of Alibaba?

Don't you end up with pretty much the same thing in both scenarios? One business that's an internet company and another that is a holding corp for Alibaba stock.

I'm not saying your wrong (a lot of people are saying this). I just don't personally understand the reasoning.

>Most telling is that Yahoo was up after the markets closed on this news.

That spike seems to have been very short lived

http://finance.yahoo.com/echarts?s=YHOO+Interactive#{"range"...

good design skills, not so good people skills. sounds like a few successful ceos we all know and adore. a ceo with less than ideal people skills needs a good operator to help balance him/her.

Seems like this is all being spun from investor perspective but is effectively the same result to us mere mortals?

> It's clear she's great at product design and not so good at people skills.

Can you remind me which great products she's designed?

google.com

She was in charge of the design of the front page of the search engine, as far as I know. From what I understand, our mental image of the Google brand—bright primary colors on white—came straight from her.

I dont know, seems kind of skimpy for qualifying someone as a CEO.

Herself?

She went in with a lot of good will. I don't see that she still has that.

Interesting question: could Yahoo have been grown, and if so, how?

Agree with your comment on her good product skills and bad people skills.

> > Yahoo’s shift in strategy comes as Ms. Mayer and her husband, Zachary Bogue, are expecting the birth of twin daughters this month

> I hope she takes a full year off, if not more. The past 4 years couldn't have been easy on her. It will be interesting to see what she does next.

Do you think other CEOs don't have children, or don't have hard jobs? Running a profitable growing company is as hard as failing to save a dying company.