With stories of Yahoo's next possible move emerging almost weekly, it's hard to know what to take seriously. The latest news states that the beleaguered search company is thinking about selling its interests in Alibaba and Yahoo Japan.
The New York Times offers the most complete coverage of this story. As currently being considered, it would not be an outright sale. The complicated deal would net Yahoo about $17 billion in cash and allow it and its partners to avoid having to pay taxes on it.
According to the Times, the terms of the deal involve Alibaba and Softbank (the major stakeholder in Yahoo Japan) setting up new subsidiaries consisting of both cash and operating assets which Yahoo wants to run. “Yahoo would swap out most of its stake in Alibaba and all of its stake in Yahoo Japan for these subsidiaries, effectively selling the holdings,” the Times explained. It's called a “tax-free cash-rich split,” and the U.S. Internal Revenue Service considers it to be an asset swap rather than an actual sale.
The deal would value Yahoo shares at around $14 each – and when rumors about it started circulating, the company's shares shot up to nearly $16 each. Loren Baker at Search Engine Journal notes that this “is ironic because over the past 4 years it has always seemed that its Asian and Arabic interests would be the future foundation of Yahoo in these emerging markets.”
To say that Yahoo's been having a shaky year is an understatement. The company seems to have been wandering for several years, uncertain of its own identity; heavy competition from Google and Facebook have only made matters worse. With the ousting of its CEO earlier this year and the emergence of several groups of investors eager to purchase Yahoo, it's been just about anyone's guess as to what Yahoo would do next and what it would look like in the months to come.
If this deal actually does go through, it would give Yahoo a huge infusion of cash it could use to restructure and reinvent itself. But what would it become? That's a tough question – one even Yahoo's own board can't easily answer, if the unnamed sources quoted by the Times can be believed.
The answer might become clearer once Yahoo finds a new permanent CEO. Some analysts have already pointed to several possible candidates. These include Hulu CEO Jason Kilar, Juniper CEO Kevin Johnson, and online advertising entrepreneur Brian McAdams. Should Yahoo find its dream CEO, one can expect that the Asian deal will go forward, and the company will decide not to sell itself to the suitors it has collected in the weeks since the board fired CEO Carol Bartz. But Yahoo faces a tremendous challenge to find the right candidate with the right skill set. Kara Swisher at AllThingD describes it as being akin to looking for “one unicorn to work magic against increasingly troublesome dragons. Ability to sparkle a plus.” Good luck with that.
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