{"id":45368,"date":"2023-10-20T15:43:06","date_gmt":"2023-10-20T15:43:06","guid":{"rendered":"http:\/\/startupsmart.test\/2023\/10\/20\/whats-going-on-at-yahoo-startupsmart\/"},"modified":"2023-10-20T15:43:06","modified_gmt":"2023-10-20T15:43:06","slug":"whats-going-on-at-yahoo-startupsmart","status":"publish","type":"post","link":"https:\/\/www.startupsmart.com.au\/uncategorized\/whats-going-on-at-yahoo-startupsmart\/","title":{"rendered":"What’s going on at Yahoo? – StartupSmart"},"content":{"rendered":"
\"Yahoo<\/div>\n

Eamonn Walsh, University College Dublin<\/em><\/p>\n

Spare a thought for the CEO of Yahoo, Marissa Mayer. Nearly four years on the job, the ailing internet giant is still struggling to deliver a credible path to growth. And following the US$4.3 billion loss the company reported for the year in its latest results, the Yahoo board undercut her plan to \u201caccelerate Yahoo\u2019s transformation\u201d with its intent to \u201cengage on qualified strategic proposals\u201d \u2013 widely interpreted as putting the company up for sale.<\/p>\n

Mayer\u2019s plan involves laying off 15% of the company\u2019s workforce in an effort to streamline the business. Yahoo is also planning to sell real estate and intellectual property. But investors are clearly unhappy with Yahoo\u2019s performance \u2013 some interpret the focus on cost cutting and profit raising as the latest sign the company is planning to offload its core business.<\/p>\n

A major reason for this is that by some measures \u2013 if you subtract the value of Yahoo\u2019s major assets from the market value of the company, which includes a hefty stake in Chinese e-commerce behemoth Alibaba, for example \u2013 Yahoo\u2019s core internet business is worth less than zero.<\/p>\n

Asset management<\/h2>\n

How Yahoo manages its investments is therefore crucial and unlocking their value is a challenge. Selling its stake in Alibaba is easier said than done. Selling the stake and paying out the proceeds to shareholders would lead to a big tax bill. One way to lower this liability, however, could be in holding the Alibaba investment under the existing company and spinning off its core Yahoo business into a new listed company. This has the obvious advantage of keeping the current management in-situ \u2013 but is premised on market confidence in the existing management team.<\/p>\n

Once a major player, Yahoo has become increasingly irrelevant, despite huge investments in engineering and media talent. Instead of cashing out when it had a US$45 billion offer from Microsoft in 2008, Yahoo has spent cash acquiring other companies and investing in new equipment in the vain hope that it can compete successfully with today\u2019s major players, Google and Facebook. This has largely been led by Mayer who was hired from Google in 2012 to turn the company around.<\/p>\n

The reporting of significant \u201cgoodwill impairment charges\u201d was essentially a write-down of the value of previous acquisitions, reflecting recognition that they have not paid off. Investor awareness of this suggests that a private buyer might be welcome to take over Yahoo\u2019s assets, optimise tax liabilities and eliminate expenditures that seek to compete in arenas where the probabilities of success are exceedingly low \u2013 this is how some have interpreted Mayer\u2019s strategy.<\/p>\n

Buyers are more likely to have a lower tolerance for re-imagination and a far more singular focus on maximising cash flows from Yahoo\u2019s existing product line \u2013 hence the board\u2019s emphasis on seeking out \u201cstrategic alternatives\u201d.<\/p>\n

In search of profits<\/h2>\n

In the meantime, Mayer will be hoping her attempts to engineer a turnaround at Yahoo materialise. In a deft presentation, she sought to break revenues into two parts \u2013 the declining revenues from the existing business and the potentially exponential growth that will result from newer product lines. Her analysis warned of decreased revenues in 2016 with the prospect of higher revenues in the future. Missing from this, however, was any detail of the profitability of these newer businesses.<\/p>\n

Ultimately, investors care about results and these were \u2013 to say the least \u2013 disappointing, and followed swift on the heels of rival Google\u2019s bumper earnings report. At best Yahoo\u2019s profit margins were 2% in the fourth quarter of 2015 compared to Google\u2019s 31.9%. Similarly, free cash flow was essentially zero in the second half of 2015.<\/p>\n

It is difficult to see Yahoo surviving in its current form with its current management. The earnings announcement was an opportunity for a far more candid account of its problems and how they could be addressed. Rather, listeners were told that things will get better in a year\u2019s time, based on an arbitrary classification of old and new products.<\/p>\n

The gap between Yahoo\u2019s market value and the value of its investments reflects investor scepticism. At such a time, phrases like \u201cpropel execution to a new level\u201d, \u201cre-imagining search\u201d and \u201cintense legacy drag\u201d are unlikely to restore confidence. If anything, Mayer\u2019s reassurances will only serve to propel investor scepticism to a new level, which further drives speculation that they are open to buyers.<\/p>\n<\/p>\n

Eamonn Walsh, Professor of Accounting, University College Dublin<\/em><\/p>\n

This article was originally published on The Conversation. Read the original article.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Eamonn Walsh, University College Dublin Spare a thought for the CEO of Yahoo, Marissa Mayer. Nearly four years on the<\/p>\n","protected":false},"author":1,"featured_media":58784,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14,1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/45368"}],"collection":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/comments?post=45368"}],"version-history":[{"count":0,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/posts\/45368\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media\/58784"}],"wp:attachment":[{"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/media?parent=45368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/categories?post=45368"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.startupsmart.com.au\/wp-json\/wp\/v2\/tags?post=45368"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}