Despite being one of the internet’s most recognizable brands, Yahoo has been falling into relative obscurity for years. The California-based tech company emphatically lost the ad wars with Google and Facebook, and have bet billions on businesses that failed to take off. One of their more high-profile failures has been the acquisition of Tumblr, purchased for $1.1 billion in 2013 but is now worth less than $900 million.
In February, CEO Marissa Mayer was forced to announce that the company was laying off 15% of its workforce - around 1,700 jobs - having made a loss of $4.4 billion. And the company’s poor performance has been a well-documented issue. Activist investors at hedge fund Starboard Value declared last month that Yahoo’s entire board should be axed for their poor performance, and it has begun engaging with the company in an attempt to secure boardroom seats.
Yahoo’s many failings have been somewhat offset by the resounding success found in their investment in Alibaba. Yahoo paid $1 billion for a 40% stake in the Chinese e-commerce giant back in 2005 and has reaped huge reward. Mayer struck a $7.6 billion deal with Alibaba in 2012 as one of her first moves as CEO, a windfall that was primarily distributed amongst shareholders to appease those who had stuck with the company through difficult years. The reward came as one of the only successful moves that the company has made in recent years. Shares have actually risen since Mayer was appointed CEO in 2012, but the company is ailing thanks to an inability to truly find its niche in the ever-changing digital world, and its attempts to do so have largely been disastrous. The company’s list of closed or defunct branded services makes for sorry reading, and its acquisitions have largely been poor.
Ultimately, Mayer and the Yahoo board have failed to build a sustainable business, and wealthier institutions are circling as the CEO considers selling. Yahoo has received bids from more than 10 companies, with the higher ones registering around the $8 billion mark. By the end of this month, the company is expected to have its bidders narrowed down to the final seven, but it will take at least another month for a winner to be decided and for Yahoo to be enveloped. Leading the bidding war is Verizon - after the likes of Google and AT&T appear to have withdrawn their interest. The Daily Mail group, YP Holdings, TGP as well as a number of other ‘strategic firms’ are also interested in challenging the US wireless provider, according to the Business Insider. Mayer said earlier this month that the sales process is a ‘top priority’ and that she is having daily meetings with interested parties. Upon confirmation of the sale price, Yahoo shares will jump, and Mayer will be once again looking to appease shareholders that have stayed with what many consider to be a sinking ship.
There are some numbers that would be appealing to a potential buyer, but the acquisition would be very much a risky one. Yes, 280 million Yahoo Mail accounts are still active, and in February Yahoo sites came in third in the US in terms of unique visitors, according to comScore data. The company also owns 6,000 patents, which ould be sold off as ‘non-core assets’ for as much as $4 billion. But accompanying figures aren’t so promising. Tumblr has decreased in value by $230 million since Yahoo’s 2013 acquisition, and its left-leaning, tech-savvy user base wouldn’t take too kindly to a Daily Mail Group takeover. Yahoo News’ unique monthly users has dropped by 11%, too, and poor management is reflected in a generally apathetic public opinion.
Perhaps contrary to expectation, Mayer stands to be one of the biggest winners from any potential takeover. The CEO’s severance package is so generous that, if she loses her job thanks to being replaced following a buy-out, she would land a huge $110 million in severance. According to stock analytics firm MSCI, Mayer has already taken home $78 million since taking the position in 2012. Even if the board were to fire her before any take-over took place, the figure would stand at $28.5 million.
If Yahoo is to be sold, there is no fundamental reason that the ailing business couldn’t be turned around. Marissa Mayer has been by no means a dreadful CEO, rather she has failed to pull off the not-insignificant task of reinvigorating a dying giant. $4.4 billion in losses was viewed by many as the final straw and, with the sale set to conclude before the summer, it will be interesting to see who takes on such a daunting task.