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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?'"
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.
Karl Marx called and wants his theory back.
Businesses may in theory work to maximise long term profitability, but in practice they are run by risk-averse humans who have finite lives and finite needs. So the ultimate drive is always to gut, reap, and run.
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?
9 + 40 = 13? Since when?
Let me explain the math: Yahoo has a market cap of about $40B. Yahoo's stakes in Alibaba and Yahoo-Japan are worth a combined $53B. So the $-13B is the value of Yahoo's core business. If they liquidate or spin off the holdings, that would generate $53B in cash, which could be returned to shareholders. Then, even if the stock price drops to zero (it cannot go lower), $13B in value has been created.
Disclaimer: I am aware that the numbers in the summary and the numbers in TFA don't actually match up.
And this is why we don't call this math... but rather "making shit up" to get money out of people.
All my liberal friends think I'm a conservative, all my conservative friends think I'm a liberal.
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.
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?
Not just "popular" -- Yahoo News is the #1 news site in the world (by traffic), Yahoo Finance is the #1 finance site in the world, Yahoo Sports is one of the top three sports sites in the world (tends to bounce around a little), and Yahoo as a whole trades the #1 ComScore spot back and forth with Google quite regularly.
I'm sure there's a lot of "hip" companies out there that *wish* they could even come close.
Can it be saved?
Short of a 2nd Steve Jobs type of CEO there is nothing left to do but sell.
I do not think Marrisa is bad. The fact is Yahoo was the leader in search, chat, groups, news, and media integration at the turn of the century. THey let it all go to shit soo bad that they can't recover.
1. Yahoo chat rooms rocked as well as AIM in 2000. THe porn spammers came in and ever 30 seconds even kids room got spammed. In 2009 I went back 9 freaking years later and all were porn BOTS!! No one did anything.
Seriously. I would have stopped this within days if I were Yang back then as people would leave and get freaked out and do not want RUssian porn spams every 30 seconds.
Skype now has audio, vidoe, calls, etc. Google Chat has this plus Google+ integration in it's own version.
2. They missed the mobile presence. DONE. THe market is made up of two. Apple and Android. No more no less. Windows Mobile is pretty nice and trying now but it is just too little too late and if Microsoft can't even get it you know you are in trouble being much smaller.
3. THe search sucked. Excite then lycos, and ultimately Google came in with intelligent data mining searches rather than just do a search for text like Yahoo did. When they got beat they shrugged their shoulders like they did with the porn spam bots for many many years and then act all shocked when everyone left?!
4. The site redesign is made for old people who do not like change or details. Old people rarely use the net more than looking at a news story or two and sending messages to their grandkids on facebook. Yeah lots of views there even if that is their demographic now.
5. They let websites like 4chan and drudge take over younger people's audiences.
6. THeir answer to livejournal and facebook was Yahoo360??! Please by 2006 it was too late.
Google deserves all of its fame. They delivered a supperior product and kept improving it at a rapid place and viewed complacency as an emeny. Google made sure they had a marketing. They also went into newer markets first before a threat could come in.Yahoo did the opposite.
I blame Yang the founder for its issues.
Yahoo needs to invent something out of this world now just to keep up. A new CEO can only do so much for places like Yahoo, Kmart, JCPenny, and other has been companies beaten out by nibble competitors. I guess like kmart you can't compete after a Walmart came in and even Target to a lesser extent.
http://saveie6.com/
they rely don't think there is such a premium.
Or the board members are more interested in keeping their jobs than in representing the interests of the shareholders. Right now, Mayer is considered a genius for doubling Yahoo's stock price. But if she spun off the holdings, it would be much more obvious that the price run-up was due to factors beyond her control, and that the core business, that she does control, has plummeted in value. It is in her interest to keep the merry-go-round spinning.
I am not surprised that the core business has lost value. I used to use several Yahoo services, but now use none. They all got so bad, they were no longer usable. Here are some specific examples:
1. movies.yahoo.com - I used to be able to go to this page, type in my zip-code, and see play times for theaters near my house. Then they changed the algorithm. Now it takes the zip-code, uses it to locate the center of the nearest large city, and shows the play times for the theaters closest to that point. I have no idea why they made this change, or what idiot thought it was a good idea.
2. news.yahoo.com - I had this configured to show news articles that I was interested in. Then they changed the interface so that all my custom configurations are gone, and instead I see articles about Kim Kardasian and Justin Beiber.
3. mail.yahoo.com - The mail interface has always been horrible, but it has worsened. They have always lacked sub-folders, and still do. So I can have a folder for "Friends", but cannot create sub-folders inside for each friend. So I can either have hundreds of folders at the top level, or file semi-related emails together. When Yahoo mail first started, I emailed them and asked about this. They replied that lots of people asked for sub-folders, and it was a "top priority". Now, 15 years and 14 thousand employees later, still no sub-folders. But at least I used to be able to narrow the "Search Mail" feature to a particular folder. That no longer works. It will now search ALL of my mail, mixing the needle I am looking for with plenty of unrelated hay.
Yahoo's directors MUST (not "should") do whatever maximizes profit for shareholders. This isn't an opinion, nor what's socially correct, but those are the rules when you issue shares to the public on U.S. stock markets.
That's wrong in a couple of ways. What's legally required is that the board member put the shareholders interests above their own personal interests (fiduciary responsibility). But those interests are defined by the corporate charter, and to a large extent by the board itself. It's perfectly legal to create a publically traded corporation that sets social responsibility, or green blah blah blah, or some other such hippie nonsense above profit, and then that's what the board must pursue. You might struggle to get investors, or you might find a welcome market, but in any case it's allowed (and rarely happens).
More commonly, there's no requirement at all for the board to chase short term profit. That's where most the corporate infighting comes. Some corporations have firm 20 and 50 year growth plans, and sacrifice the short term for those plans, and sometimes those companies have a shareholder revolt because the owners lose patience and want everything monetized now. Sucks when that happens, but the downside of being a publically traded corporation is that you're ultimately controlled by your owners, and that can end up being anyone.
Socialism: a lie told by totalitarians and believed by fools.