Yahoo! Inc.’s YHOO revenues remain stagnant and it hasn’t really managed to come up with a product that could create a little buzz either among consumers or investors.
That’s not all.
Employees seem to have lost their trust in CEO Marissa Mayer. After Jackie Reses, one of her main lieutenants, Chief Marketing Officer, Kathy Savitt, is ready to hand in her papers.
Also, Prashant Fuloria, Senior VP of Products and Engineering, Advertising Products, is going to leave the company at the end of this year. Though nothing definite is known about his plans, the company did mention that he will work with nascent companies and entrepreneurs.
Following the reports, Yahoo shares went down 2.02% on Friday morning to $33.93.
Meanwhile
While employees are busy looking for work elsewhere, investors seem to have assumed the role of sincere workers!
The latest suggestion, according to the Wall Street Journal, comes from a hedge-fund investor in the company, Eric Jackson, managing director of New York hedge of SpringOwl Asset Management LLC.
Per media reports, he has put forward a 99-page slide presentation to Yahoo outlining his plan to —
- cut the workforce by a whopping 75%,
- replace Mayer with an operations-focused CEO, and
- bring in a strategic partner to help pilot the tax issues surrounding the Asian assets.
He recommends reducing annual costs by $2 billion via reduction of workforce and, abolishing perks like complimentary food and selling the headquarters. He suggests leasing back only the office space that the company requires.
There’s more.
In order “to send a message that the era of Marissa Mayer is now over”, he wants Yahoo to use the previous logo and bring back the iconic billboard along San Francisco’s Highway 101.
This is a strikingly different suggestion than the ones offered by other investors.
Both Starboard Value LP and Canyon Capital Advisors LLC have submitted letters advising the company to sell the core business.
Going Ahead
Yahoo has decided not to spin off its Alibaba stake BABA. (Read: Yahoo Decides Against Alibaba Stake Spin-off: Is it a Hold?)
Now, the company is evaluating options to spin-off its core Internet business and the Yahoo! Japan stake into a publicly-traded company. The company’s core business includes advertising, search technology, Yahoo Sports and the Tumblr blogging platform. It has been struggling to gain market share in online and mobile advertising from Alphabet and Facebook Inc.
The new spin-off plan could save billions in tax dollars, as Yahoo’s core business is valued at lower than the 15% Alibaba stake.
While the name of the new company has not been disclosed, the process is expected to take a year or more to be completed. Potential buyers of Yahoo’s Internet business are Verizon VZ, AT&T T, Comcast and private equity firms that specialize in buying troubled companies.
If Yahoo does manage to find a buyer for part or all of its business, this would be an opportunity to finally cash out of the ailing Internet company. Since the Asian assets will fetch a good value, the uncertainty is related to what a buyer would be willing to pay for a core business that the market has bailed out on.
Currently, Yahoo has a Zacks Rank #3 (Hold) with a Momentum Style Score of “B”. The stock falls in a solid industry that has a Zacks Rank in the top 22% at the time of writing.
To sum up, play the waiting game as it is too early to give up on the stock.
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