What If…Yahoo Gets Sold?

In recent days, speculation has ramped up considerably. When 1st quarter earnings were reported earlier this week, analysts were not surprised. Revenue from mobile and native advertising were up, total revenue was down. Activist investors are itching to unlock whatever value they can find before it dries up. Verizon, a couple of private equity groups and another composed of former execs including ex-interim CEO Ross Levinsohn are in the hunt. Re/code has done an excellent job of summarizing the goals of each bidder.

If (when) Yahoo gets sold, it will be the end of an era. Jerry Yang and David Filo launched Yahoo on Jan 18, 1995, three years before Google and nine years before Facebook.  It was originally called “Jerry and David’s Guide to the World Wide Web.” The name Yahoo is a backronym (the creation of a phrase to fit an existing wordfor “Yet Another Hierarchically Organized Oracle.” However, Y! lore says Filo’s girlfriend referred to him as a “yahoo” (David grew up in Moss Bluff, Louisiana) intended to mean an unsophisticated, rural Southerner as in Gulliver’s Travels.

The company soon became the de facto standard for web search. It acquired numerous companies that expanded it core services like Four11 (mail), Broadcast.com (music radio) which made Mark Cuban a VERY wealthy man, GeoCities (web hosting), eGroups (message boards), Launch Media (music), HotJobs (job search), Overture (search marketing), Ludicorp (Flickr), del.icio.us (web bookmarking), Rivals.com (sports), BlueLithium (ad network), Maven Networks (video on-demand), Tumblr (microblogging) and Brightroll (programmatic video advertising).

In 2008, Microsoft offered $44.6 billion to acquire the company and, now hard to believe, was rejected as an undervalued bid. By 2011, Yahoo’s market cap was 50% of this offer. Since then, the company has been in a downward spiral. Many leaders have tried to create a new, sustainable vision for the company with little today to show for it.

The core assets are now for sale. Y! still owns 15% of Alibaba and 36% of Yahoo Japan totalling approx $35 billion in value. At a current stock price of $38, that just about equates to the value of these two holdings so the company’s core assets are effectively worth $0 on paper. Yet, there are bidders who see strategic value in such an acquisition. Marissa Mayer has said the “right transaction” could realize “strategic synergies.”

Time will tell how this plays out. Oh how the mighty have fallen.

#     #     #