Yahoo May Be Up For Sale

Hot on the heels of news that Yahoo fired Carol Bartz, its CEO, come stories that the company is putting itself up for sale. Whether or not this is true, these rumors have excited fresh speculation as to who might be interested in buying the beleaguered Internet firm.

The venerable search company, older than Google but clearly beaten by the latter in market share, now looks ready to throw in the towel. Despite founder Jerry Yang’s insistence that Yahoo is not up for sale, no reasonable observer believes the company will continue forward in its current state. Yahoo is hiring advisory firms and strategic investment bankers to help them decide what to do next. Some cite Allen & Co. as a likely hire; that firm is currently advising AOL and many other tech and media firms.

Despite initial appearances, Bartz was far from the only problem at Yahoo. There’s enough blame to go around, and if Bartz lost her job over it, the man who fired her – Roy Bostock, the chairman of Yahoo’s board of directors – just might be next. It was on his watch that Yahoo turned down a $44.6 billion takeover bid from Microsoft that valued the search company at 62 percent over its stock price. That rejection looks foolish today, with Yahoo’s market share projected to fall below 10 percent in the next year.

Indeed, Third Point LLC, a New York investment company that owns a little over five percent of Yahoo in stock, urged Yahoo’s board of directors to resign. “Yahoo’s current board of directors has made a number of decisions that have directly harmed the company and resulted in a stock price far below the company’s intrinsic value,” Third Point stated in a regulatory filing. Bartz may not have helped things, but neither has Bostock; Yahoo’s shares have lost 49 percent of their value since he became chairman early in 2008.

That leaves an important question: if Yahoo is up for sale, who will buy it? Microsoft seems unlikely, if only for the fact that the ten-year agreement it eventually struck with Yahoo gave it everything it was probably looking for in an outright purchase anyway. Apple has been touted as a possibility, but the two companies don’t really seem to be a good fit given their products and services. AOL might be a closer match to Yahoo, but that company has troubles of its own. Google couldn’t touch a purchase of Yahoo with a ten-foot pole, even if it wanted to; there’s no way the antitrust regulators in the United States would allow such a huge deal to go forward.

That leaves two possible candidates. One would be some kind of media- or content-focused company, such as the New York Times. The other candidate is Jack Ma, founder and head of Alibaba Group, China’s biggest e-commerce firm. Yahoo owns a 40 percent stake in Alibaba Group, which means they also own stakes in Taobao.com, China’s biggest online shopping site, and Alibaba.com, a firm that provides e-commerce services to businesses.

Jack Ma is also the owner of Alipay.com, a Chinese online payment company similar to PayPal. Alipay was originally part of Yahoo’s Asian holdings through its stake in Alibaba Group, but the latter sold Alipay to Ma without telling Yahoo until months later. It’s no secret that Ma wants to buy back the stake in Alibaba Group that he sold to Yahoo back in 2005, but up until now Yahoo has been unwilling to make the sale. Circumstances may make the company change its mind.

Sadly, the most likely course for Yahoo may be the equivalent of a yard sale, with investment advisors and holding companies presiding over the remains, handing pieces off to the highest bidders. It hardly seems a dignified end for a company that was once at the forefront of the growing Internet economy. 

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