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Investors Value Yahoo's Core Business At Less Than $0
An anonymous reader writes "Yahoo is most known for its search, email, and news services. But its U.S. web presence is only part of its corporate portfolio. It also owns large stakes in Yahoo Japan and Alibaba (a web services company based in China). Yahoo Japan is publicly traded, and Alibaba is heading toward an IPO, so both have a pretty firm valuation. The thing is: when you account for Yahoo's share of each and subtract them from Yahoo's current market cap, you get a negative number. Investors actually value Yahoo's core business at less than nothing. Bloomberg's Matt Levine explains: 'I guess this is fairly obvious, but it leads you to a general theory of the conglomerate discount, which is that a business can be worth less than zero (to shareholders), but a company can't be (to shareholders). ... A fun question is, as fiduciaries for shareholders, should Yahoo's directors split into three separate companies to maximize value? If YJHI and YAHI are worth around $9 billion and $40 billion, and Core Yahoo Inc. is worth around, I don't know, one penny, then just doing some corporate restructuring should create $13 billion in free shareholder value. Why not do that?'"
1. You sell me Core Yahoo for .01
2. I call Google, Microsoft, and some other loonies.
3. Profit
P.S. I reinvest line 3 into a new company called Mauls where we make solar self-actuating molar embedded mice that navigate as you chatter. Start over at line 2....
When the foot seeks the place of the head, the line is crossed. Know your place. Keep your place. Be a shoe.
If YJHI and YAHI are worth around $9 billion and $40 billion, and Core Yahoo Inc. is worth around, I don't know, one penny, then just doing some corporate restructuring should create $13 billion in free shareholder value. Why not do that?'"
9 + 40 = 13? Since when?
Weird.
So she MUST be a great leader, who's going to revitalize the company and make them profitable and hip! It couldn't just be hype, that's unpossible!
SJW's don't eliminate discrimination. They just expropriate it for themselves.
There is literally nothing to be gained by splitting the company up except fictional paper valuations. Gutting the company so shareholders can profit is such a boneheaded, shortsighted idea that I thought for a second we'd been teleported back in time to the corporate raider 80s.
Has anyone has believed Yahoo! post Mayer's 'strategy' is anything but biding time for the inevitable shutdown or way below cost acquisition?
Everything Yahoo was, namely search, was purchased greedily by microsoft after a relentless and quite aggressive 3 year campaign to make a Bing. that search was then rolled into a search engine that by its very definition could never find itself in the ecosystem of internet websites outside of the mandatory, default configuration in internet explorer. Yahoo is for all intents and purposes a holding company that re-invests what little capital it still maintains into genuinely innovative companies. it sloughs off its patents to the highest bidder and treats its employees with ever growing contempt. Yahoo is not an internet company, its the monopoly man with dog-eared pockets shuffling the streets of internet town. Its designed to return dividends to a select group of core investors through a combination of profiteering and axing the headcount.
Good people go to bed earlier.
The pea is under this shell, are you looking? Okay, watch carefully, the hand is quicker than the eye.. the shells move, they move, they move, keep watching, keep watching. Voila! 13 billion dollars in value were under the third shell. Did you choose right?
Namely, don't you value Alibaba based on the size of Yahoo's investment (plus a multiple for future growth), rather than using that investment to gauge how much the investor is worth?
Did not even recall them being still alive. Morning coffee surprise!
A lot of unhappy programmers....
I find it so odd that people keep dismissing yahoo because it is not cool.
1. Yahoo actually makes money.
2. Yahoo has a lot of users.
3. Some services like Yahoo mail are still very popular.
I use Gmail as may main account and outlooks as my professional webmail. I use Yahoo mail as my signup email but that is only just habit for me. Yahoo mail is not bad at all IMHO.
For techies Yahoo is history but for a lot of normal users it is still relevant. I am very techie but I still use my.yahoo page as a start page for me.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
The book Think and Grow Rich by Napoleon Hill. He spends a fair amount of time discussing this exact thing. Wonderful read that everyone should invest a few hours in.
http://www.WinWithRealEstate.com/
I don't know about the companies in China and Japan, and I don't know about stocks, but the general idea that Yahoo isn't actually worth much is unsurprising. Do people still use Yahoo.com or Yahoo mail? Yahoo IM? I understand that, like AOL, Yahoo owns other sites that are doing well, but what's Yahoo's strategy? How are they making money in the face of Google and Gmail?
This is sacrilege posting this on slashdot, but the value in technology isn't the software but in an actual tangible product you can hold or in the case of Yahoo a semi decent service. Software has no value when it can be copied without restriction. Yes we have DRM, copyright law, etc but when a bunch of Chinese hackers can copy software then there is no value. Yahoo is a terrible service with a terrible email client barely remaining relevant in this world where its main competitors have moved into different arenas like mobile devices and even becoming an ISP.
And seriously who uses Yahoo anymore? Old curdy boomers who have never heard of Gmail or Google? I have no idea. Yahoo needs to die and its patent carcass picked clean.
and take my money!
The valuation sounds about right to me.
Overall I would say Yahoo!'s net contribution to the web has been a negative one.
Its been basically a drop in replacement for AOL.
"Yahoo is most known for ..."
You wish. Most people think it died with Compuserve and Second Life.
Maybe they fixed it recently. But in the not too distant past it would routinely hang, give web errors and was generally very slow. It also had some seriously terrible ergonomic issues. They've fixed it quit a bit lately but since they spent years destroying the simple but useful interface, I'm wondering if the recent performance is an anomaly and MM and company will resume making the user experience worse.
Investors in aggregate do not explicitly consider the indirect ownership of share inthose two businesses in the valuation of yahoo. Something in the same ballpark as 'more than the sum of its parts' applies to the other companies.
I used to work for a biotech company. After we went public our stock did nothing but sink. There was a period of time where our total value was substantially less than our cash in the bank. In other words, a pile of money in the hands of our management was worth less than the same pile of money just sitting on a table. I tended to agree with the market on that one.
When your value is worth less than your assets it is chapter 7 dissolution or sell time.
Time to throw in the towel and give back the money to the shareholders. I am sure the building and the brand name might mean something to someone at this point.
But the CEO will be giving quite a black eye from this and would look pretty bad for the resume so it is a give and take.
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Every time I look at Yahoo's home page, I know in my heart that it is not only worth less than nothing, but is actively, positively evil. It makes People magazine look intellectual.
Please do not read this sig. Thank you.
Just because the pre-IPO value says one thing it doesn't mean those valuations are correct once they get in to the open market.
Zynga for example is now worth ~1/2 - 1/3 of their pre-IPO value.
What might be going on here is a bit of over valuation of Alibaba (often triggered by the 'excitement' around a large IPO) and Yahoo Japan. If this is the case it is possible Yahoo's valuation is currently about correct.
It is also possible the Yahoo core is undervalued, in which case it makes it a good time to invest in Yahoo as it is likely that eventually the stock will adjust upwards.
The most likely scenario is really a combination of both Alibaba having a somewhat inflated current valuation based off future potential (which is fine but breaks 'now' if you use that future value to calculate the now value of something) along with Yahoo's core being a bit undervalued because they aren't being as flashy and loud as Google or Microsoft.
common flaw in greenmailer philosophy... except they only care about the now, and screw the future.
the subsidiary operations that look cash-positive are dependent on services from the core company, and generally share synergies (back-office costs, research, brand value, facilities, yo'momma, whatever) which make them look better on the spreadsheet.
take that away in a breakup, all of a sudden the "haves" are hurting for resources, and need to spend big to replace them. but the experience needed to utilize the resources went with another arm of the octopus.
therefore, (5a): no profit and flounder.
this "unlocking shareholder value" thing is a cloak over the same old pirate uniform.
if this is supposed to be a new economy, how come they still want my old fashioned money?
Brian: Lady, seven bucks for a used Kenny Loggins record? I'll give you five.
Record Store Customer: Ugh-huh, he autographed it himself.
Brian: All right, I'll give you four.
I searched for this "Yahoo" "Japan" website since I never heard of it. I used Google naturally since Yahoo.com's results, as this article points out, are worth less than nothing.
I found the website but it is absolutely incomprehensible.The writing is in mixed font characters on my computer. It looks like the wingding font. Do I need to install additional fonts?
Yahoo engineers should get on fixing this right away. They built a large presence with such gibberish, think of the possibilities when we can -all- read it!
1. Gibberish site
2. Fix fonts and spell-check
3. ????
4. Profit!!!
Every time I think they've hit rock bottom, they circle around one more time. First, mail was so overwhelmed by spam I started my Gmail account. When they finally got that fixed they jacked up the UI. Then they turned around and adopted some of those terrible UI metaphors Gmail introduced. I used to play Yahoo Hearts, but the game hasn't been significantly updated in at least 10 years and problems like trolls and stallers persist. Of course, search has been inferior for a decade. I had started using Yahoo news for the comments section and they even managed to jack THAT up so now their stories are like a wasteland for interacting with other readers.
Yahoo Answers was one of the last places I would hang out religiously, but then they obliterated the UI which made me swore it off. When I thought about coming back, they sealed the deal and made a change where only the asker can reward an answer (note most people from my experience don't have the courtesy to thank you or even credit you for the correct answer).
You know that fable of the dumb kid in class they figured out was actually a genius because they figured out his scores were so low it had to be intentional? I wonder if this is some Wall Street shell game to tank the company. I just can't believe Yahoo could guess wrong this many times on accident.
I swear to God...I swear to God! That is NOT how you treat your human!
When it was spun off, the value of Palm was something like $16B more than the value of the parent company before the split. Of course we all know how well that worked out.
I find it amusing that a post suggesting that Yahoo should basically just "close up shop and go home" was posted anonymously. It makes me wonder if perhaps the hands behind this particular post belong to someone at Google... who doesn't want Yahoo to succeed at it's various rumored "come back" plans, such as trying to swipe the default iOS search engine crown, and trying to build a YouTube competitor.
Think of Yahoo of a steamship carrying $53 billion worth of precious cargo. The ship captain has been piloting the ship aimlessly around the globe, selling off cargo at each port to pay for fuel to get it to the next port, for no reason. How much would you pay for that boat?
"In a 32-bit world, you're a 2-bit user. You've got your own newsgroup, alt.total.loser." -Weird Al
I have a Yahoo email account. In fact, it is my most active email account. Over the last few months Yahoo has been working very hard to make Yahoo email less usable. From my experience, they seem to have slowed the response time, added race conditions in the UI which prevent controls from working, completely ruined address completion, and done other things that I just cannot understand. Let me give an example, from my real-world use, of the address completion problem.
I have a user named William Whatever whose nickname is Bill. (Yahoo contact info has a nickname field.) Until a couple of weeks ago when I wanted to send email to Bill I could just type Bill in the "To" field and William Whatever's address would pop up as a choice along with one other contact called Bill. Pretty simple and useful, right? Now when I type Bill it seems that Yahoo searches all my old mail, with an associated long pause while the search occurs, and presents a list of eight names which potentially match Bill, mostly names that are not in my contact list but were gleaned from address lists emails I received in the past, which I did not add to my contact list. However, my friend Bill's name, which is in my contact list, is not included among the choices. Instead, I have to type William. But it get's better! After I select William from the list Yahoo pops up another list of choices which are "frequently included" and, lo and behold, Bill is first on that list! Yes, Bill, the nickname which did not show up at all on the first list. To make matters worse, many of the email addresses in the first list are wrong because the person who sent me an email in the past has changed his email address and the address presented in the list is no longer in use. I ask myself why Yahoo has decided to ignore my declared contacts in favor of unused and unwanted names gleaned from old emails, but I cannot imagine any situation where that is desirable.
If anyone out there has any internal influence at Yahoo then please find the architects, programmers, and PHBs responsible for stupidity such as this and slap them! Repeatedly!
The share value of a stock is the perceived value, in today's dollars, of all future business the company will do. Market cap has nothing to do with the value of a "core business."
The summary writer is confusing book value with market capitalization.
Let me get this straight.
The stock price of a company is reflected in its market cap.
The company has assets (AliBaba and Yahoo Japan) that exceeds its market cap
Shouldn't the proper conclusion drawn be that the company is undervalued, and its stock price is cheap? To label its core holding as worthless is just not helpful.
There is a reason Marissa Mayer is cozying up to Apple in a bid to replace Bing as the default search engine on iDevices. Instant, incredible spike in search engine traffic and advertising revenue.
Apple appears to be highly interested in dis-aligning itself from companies it views as peer or near-peer competitors, or reducing entanglement as much as possible. Google's privacy issues, Nexus devices and cozy relationship with Samsung (and other premium Android flagship makers) leaves a bad taste in Cupertino. And Bing is .. well.. Bing. But Yahoo! was early to the party, doesn't particularly carry negative baggage with it as far as consumers are concerned, and isn't competing against Apple in any market space, so why not.
Apple has placed itself in a delicate position. They have become like a premium fashion design house in Paris or Milan. They manufacture next to nothing- they design, then send patterns off to an army of contract manufacturers in Asia to get the Spring line, Summer line, Fall line, Winter line into stores. And then those manufacturing partners produce higher and higher quality knockoffs or competing designs inspired by the the originals, which they are paid to produce. It must gall Apple to be so reliant on Samsung to fab their A7 (and A8) processors, LG to make their iPhone 5/C/S displays, all while those companies position their own premium Android flagships to compete against Apple.
Apple will most likely switch to Yahoo! for default search results, and it will lift Yahoo's stock - and public image - dramatically.
THIS SPACE INTENTIONALLY LEFT BLANK.
And the YAHOOS had to go and F[]ck up Flickr
I think there's a more sensible explanation. Maybe the market simply values Alibaba less than those analysts do. I'd trust Mr. Market a lot more than some overpaid analysts.
Or it could be that Yahoo Japan and Alibaba are also overvalued.
This really seems more plausible.
Why do think there's this hero worship mythology built up around Marissa Meyer? Because the Yahoo business is the JC Penney of the internet.
I suspect the problem here is that the stock market is inefficient or irrational, and the Efficient Market Hypothesis is wrong. I suspect that alibaba is in a bubble and overvalued. Furthermore, it has been bid up in a bubble by amateur investors, who don't realize that they could acquire a stake in alibaba more cheaply by buying yahoo stock instead. Professional investors won't short alibaba, because they think the price for it won't correct quickly enough.
If my suspicion is correct, then the CEO of Yahoo should sell all shares in alibaba and yahoo japan, and should retain the $48bn as cash for yahoo. Professional investors will then bid up the price of yahoo stock (now shed of what they think is an overvalued asset) because they realize that yahoo plus $48bn is worth more than $48bn, since yahoo is slightly profitable. By doing so, yahoo would gain $13bn or more in market capitalization. Yahoo will have "cashed out" on what professional investors think is an overvalued asset (alibaba), and will have benefitted from amateur investors bidding up the price of something which yahoo partially owns without realizing that they should have bought yahoo stock instead.
I have been forced to sign up for YahooGroups over the years just so that I can have my email address stolen by spammers and receive copious supplies of electrons in the form of Viagra emails. We could run the planet on that electricity coming across the wire. I learned long ago to use disposable email addresses and to block all other than the Yahoo mail servers just to keep the spam under reasonable control. I would dump it in a heartbeat if the projects I needed would just move elsewhere. No such luck.
What the market is essentially saying is they don't agree with Bloomberg analyst's or others' evaluation of the value of these other companies. The natural conclusion is the market says THE ANALYSTS ARE WRONG in their estimates of the worth of Yahoo Japan/Alibaba.
It is the analysts, not the public that assume it is the US portion of Yahoo's operations that are being valued at $0.
By the way.... just because some Alibaba stock or some Yahoo Japan stock is available on other exchanges at a certain price; does not mean the entire company is valued at the current marginal price of stock trades. That is a form of extrapolation which is subject to large errors. The market valuation of Yahoo US based on price of individual shares is also an extrapolation.
One should not assume that all the outstanding shares in Yahoo are available for the same price, to an investor possessing current marginal trading price in $ per share times number of shares, in cash.
That doesn't really tell you what the market will value the company at, perhaps as a rough estimate with errors between 10x and 100x.
It is just the analyst/reporter's underhanded way of saying -- since we're infallible about the proper valuation of these quickly growing portions, and nobody else could possibly ever see any differently ----- any difference in US stock price must be attributed to negative value from the slower growing portion of the business.
Maybe it's just that their other non-US operations are being assigned a discount, for various reasons, below what the analyst wants to value them at.
I would be shocked if this wasn't intentional maneuvering to use the entire core of Yahoo as part of a tax write-off scheme to pay next to nothing on any profits they make from Yahoo Japan and the upcoming Alibaba IPO.
"We're valued at -$13bn, therefore Mr IRS, take a piss with your tax bill."
@Mindless Drivel: 100% of Twitter posts ever Tweeted.
What they need to do is restructure yahoo.com.
I love all the contortions people go through to prove markets are rational. Alibaba keeps getting higher and higher valuations, Yahoo's stock more or less follows market fluctuations, therefore Yahoo core must have lost billions in value over the last few months and be worth negative dollars even though Yahoo Core is quite profitable. Suuuure. This same thing happened with EMC when VMWare went IPO. It took a few weeks for investors to do simple math.
Disclaimer: I work at Yahoo
The whole is less than the sum of its parts