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Yahoo’s Suitors Uncover Few Financial Details Yahoo’s Suitors Uncover Few Financial Details
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SAN FRANCISCO — As Yahoo prepares to accept first-round bids for its core Internet business on Monday, potential buyers have found themselves facing one big problem: How do you value a company with a declining business when the company appears reluctant to share vital financial details?SAN FRANCISCO — As Yahoo prepares to accept first-round bids for its core Internet business on Monday, potential buyers have found themselves facing one big problem: How do you value a company with a declining business when the company appears reluctant to share vital financial details?
In meetings and phone calls with potential bidders, Yahoo executives have offered gloomy financial projections for the current year, but have refused to discuss the outlook for 2017 or answer questions about crucial aspects of the business. Some of the three dozen or so potential suitors have even questioned what is truly for sale.In meetings and phone calls with potential bidders, Yahoo executives have offered gloomy financial projections for the current year, but have refused to discuss the outlook for 2017 or answer questions about crucial aspects of the business. Some of the three dozen or so potential suitors have even questioned what is truly for sale.
But several big companies are expected to place bids for Yahoo anyway, according to people briefed on the matter. Verizon Communications, which has publicly expressed interest in buying Yahoo’s core Internet business and merging it with its AOL division, plans to press forward with a bid, some of these people said.But several big companies are expected to place bids for Yahoo anyway, according to people briefed on the matter. Verizon Communications, which has publicly expressed interest in buying Yahoo’s core Internet business and merging it with its AOL division, plans to press forward with a bid, some of these people said.
The Daily Mail, a British tabloid newspaper and website, said publicly that it had considered joining with potential investors, including one or more private equity firm, for a bid. And the private equity firm TPG plans to make a bid in the first round on its own, according to a person briefed on the matter.The Daily Mail, a British tabloid newspaper and website, said publicly that it had considered joining with potential investors, including one or more private equity firm, for a bid. And the private equity firm TPG plans to make a bid in the first round on its own, according to a person briefed on the matter.
Yet other huge companies plan to sit out the bidding. Google, which competes with Yahoo on search and display advertising and has a search partnership with the company, considered making an offer, but is unlikely to proceed because it fears any deal would draw stiff antitrust scrutiny, according to people briefed on the company’s thinking.Yet other huge companies plan to sit out the bidding. Google, which competes with Yahoo on search and display advertising and has a search partnership with the company, considered making an offer, but is unlikely to proceed because it fears any deal would draw stiff antitrust scrutiny, according to people briefed on the company’s thinking.
Other notable businesses, including AT&T, CBS and the investment firms Silver Lake, Kohlberg Kravis Roberts and General Atlantic, are unlikely to bid, according to others briefed on their plans. And SoftBank, the Japanese telecommunications giant that controls Yahoo Japan, does not plan to bid despite press reports to the contrary.Other notable businesses, including AT&T, CBS and the investment firms Silver Lake, Kohlberg Kravis Roberts and General Atlantic, are unlikely to bid, according to others briefed on their plans. And SoftBank, the Japanese telecommunications giant that controls Yahoo Japan, does not plan to bid despite press reports to the contrary.
A 90-slide presentation shown to potential Yahoo bidders is dense with figures, but even people familiar with the company’s operations have struggled to make sense of them. At the same time, Yahoo devoted just a couple of slides to important strategies, like its costly Hail Mary project to create an entirely new mobile search experience to leapfrog competitors like Google, Apple and Amazon.A 90-slide presentation shown to potential Yahoo bidders is dense with figures, but even people familiar with the company’s operations have struggled to make sense of them. At the same time, Yahoo devoted just a couple of slides to important strategies, like its costly Hail Mary project to create an entirely new mobile search experience to leapfrog competitors like Google, Apple and Amazon.
Representatives of Verizon, Google, AT&T and CBS declined to comment. A Yahoo spokeswoman also declined to comment on the sales process.Representatives of Verizon, Google, AT&T and CBS declined to comment. A Yahoo spokeswoman also declined to comment on the sales process.
Marissa Mayer, Yahoo’s chief executive, is expected to face questions about the bidding on Tuesday, when the company reports its latest quarterly earnings. The report should offer a window into how Yahoo is weathering the upheaval caused by the layoff of 15 percent of its work force announced in February. The total value of Yahoo shares is now about $35 billion.Marissa Mayer, Yahoo’s chief executive, is expected to face questions about the bidding on Tuesday, when the company reports its latest quarterly earnings. The report should offer a window into how Yahoo is weathering the upheaval caused by the layoff of 15 percent of its work force announced in February. The total value of Yahoo shares is now about $35 billion.
The company may also disclose sales of patents and real estate, which it began shopping a couple of months ago in the hope of raising $1 billion to $35 billion. The company may also disclose sales of patents and real estate, which it began shopping a couple of months ago in the hope of raising $1 billion to $3 billion.
One reason for Yahoo’s reluctance to share information may be that the business is worse than the company has publicly disclosed. That has added to confusion regarding the intentions of a board of directors that, just a few months ago, publicly said it had no intention of selling.One reason for Yahoo’s reluctance to share information may be that the business is worse than the company has publicly disclosed. That has added to confusion regarding the intentions of a board of directors that, just a few months ago, publicly said it had no intention of selling.
Ms. Mayer has often said she wants to make Yahoo services a “daily habit” for Internet users. But after nearly four years of effort, only about 10 percent of the one billion monthly visitors to Yahoo sites return every day, suggesting little attachment to the brand, according to people who have seen confidential internal data. At Facebook, by comparison, 65 percent of users visit daily.Ms. Mayer has often said she wants to make Yahoo services a “daily habit” for Internet users. But after nearly four years of effort, only about 10 percent of the one billion monthly visitors to Yahoo sites return every day, suggesting little attachment to the brand, according to people who have seen confidential internal data. At Facebook, by comparison, 65 percent of users visit daily.
Yahoo is in a difficult position. Ms. Mayer’s four-year turnaround effort has failed to deliver significant improvements at a company that has been in decline for a decade. Ms. Mayer argues that she is turning the tide with new investments in areas like video and native advertising.Yahoo is in a difficult position. Ms. Mayer’s four-year turnaround effort has failed to deliver significant improvements at a company that has been in decline for a decade. Ms. Mayer argues that she is turning the tide with new investments in areas like video and native advertising.
Activist investors, led by the Starboard Value hedge fund, have run out of patience and are pressing the board to sell the core business, separating it from the company’s far more valuable investment stakes in Alibaba, China’s leading e-commerce company, and Yahoo Japan, a separate, publicly traded company.Activist investors, led by the Starboard Value hedge fund, have run out of patience and are pressing the board to sell the core business, separating it from the company’s far more valuable investment stakes in Alibaba, China’s leading e-commerce company, and Yahoo Japan, a separate, publicly traded company.
Yahoo’s board, which spent more than a year working on other plans to separate the investment stakes, reluctantly agreed to explore a sale of all or parts of the company and hired three investment banking firms to run the process. Starboard has formally threatened a proxy fight to replace the entire board at the next shareholder meeting if the directors do not follow through on a sale.Yahoo’s board, which spent more than a year working on other plans to separate the investment stakes, reluctantly agreed to explore a sale of all or parts of the company and hired three investment banking firms to run the process. Starboard has formally threatened a proxy fight to replace the entire board at the next shareholder meeting if the directors do not follow through on a sale.
Ms. Mayer has publicly laid out a path for an independent Yahoo and made the case to potential bidders that they should retain her as chief to carry out the plan.Ms. Mayer has publicly laid out a path for an independent Yahoo and made the case to potential bidders that they should retain her as chief to carry out the plan.
Abandoning previous forays into video and digital magazines, Ms. Mayer, who formerly headed search at Google, is now focused on returning Yahoo to its glory days as a search engine. Although comScore says that Yahoo is currently the No. 3 player in desktop searches, behind Google and Microsoft, Ms. Mayer argues that Yahoo can leap ahead through a “complete reimagination of mobile search.”Abandoning previous forays into video and digital magazines, Ms. Mayer, who formerly headed search at Google, is now focused on returning Yahoo to its glory days as a search engine. Although comScore says that Yahoo is currently the No. 3 player in desktop searches, behind Google and Microsoft, Ms. Mayer argues that Yahoo can leap ahead through a “complete reimagination of mobile search.”
Ms. Mayer has assigned about 1,000 people to search products, or about 10 percent of the company’s staff, according to people briefed on the business. The mobile effort, code-named Project Index, has officially been underway for two years and aims to create a search tool similar to Google Now on Android phones, Apple’s Siri, Microsoft’s Cortana and Amazon’s Alexa.Ms. Mayer has assigned about 1,000 people to search products, or about 10 percent of the company’s staff, according to people briefed on the business. The mobile effort, code-named Project Index, has officially been underway for two years and aims to create a search tool similar to Google Now on Android phones, Apple’s Siri, Microsoft’s Cortana and Amazon’s Alexa.
But the team has little to show for its work, and many at Yahoo wonder whether it is a hopeless quest. Industry experts as well as Yahoo insiders say that without the location and personal data that Apple and Google have, Yahoo will have a difficult time predicting what people want with enough accuracy to get them to switch from other services.But the team has little to show for its work, and many at Yahoo wonder whether it is a hopeless quest. Industry experts as well as Yahoo insiders say that without the location and personal data that Apple and Google have, Yahoo will have a difficult time predicting what people want with enough accuracy to get them to switch from other services.
“There is a massive opportunity for mobile search,” said Keith Rabois, a partner at Khosla Ventures, who invests in search start-ups. “But I don’t think Yahoo has the core assets or skills you would need to succeed or thrive right now.”“There is a massive opportunity for mobile search,” said Keith Rabois, a partner at Khosla Ventures, who invests in search start-ups. “But I don’t think Yahoo has the core assets or skills you would need to succeed or thrive right now.”
A Yahoo spokesman said that the company was exploring many search ideas, including the use of software bots that would fetch information on behalf of users.A Yahoo spokesman said that the company was exploring many search ideas, including the use of software bots that would fetch information on behalf of users.
Ms. Mayer’s vague plans for reversing Yahoo’s decline, along with the lack of disclosure about the company’s finances, have made prospective bidders nervous.Ms. Mayer’s vague plans for reversing Yahoo’s decline, along with the lack of disclosure about the company’s finances, have made prospective bidders nervous.
Though several private equity firms have been looking at the company, people involved in the bidding process said that they were unlikely to prevail against a determined corporate buyer.Though several private equity firms have been looking at the company, people involved in the bidding process said that they were unlikely to prevail against a determined corporate buyer.
Verizon is viewed by analysts as the leading bidder for Yahoo, but its likely offer comes despite trepidation among its executives, according to the people briefed on the bidding.Verizon is viewed by analysts as the leading bidder for Yahoo, but its likely offer comes despite trepidation among its executives, according to the people briefed on the bidding.
Verizon is still struggling to digest its $4.4 billion acquisition last year of AOL, and some executives worry that buying Yahoo would simply be doubling down on integration troubles.Verizon is still struggling to digest its $4.4 billion acquisition last year of AOL, and some executives worry that buying Yahoo would simply be doubling down on integration troubles.
Verizon could certainly combine the content properties and ad products and networks run by Yahoo and AOL.Verizon could certainly combine the content properties and ad products and networks run by Yahoo and AOL.
The company, with more than 112 million cellphone customers on top of its landline Internet subscribers, would have the ability to preinstall Yahoo services and distribute them widely.The company, with more than 112 million cellphone customers on top of its landline Internet subscribers, would have the ability to preinstall Yahoo services and distribute them widely.
However, the contracts governing Apple iPhones and phones running Google’s Android operating system generally restrict what phone carriers can do to promote alternatives for major services like search and email. So Yahoo would still need to build products good enough to persuade people to switch.However, the contracts governing Apple iPhones and phones running Google’s Android operating system generally restrict what phone carriers can do to promote alternatives for major services like search and email. So Yahoo would still need to build products good enough to persuade people to switch.
Wall Street is hoping for a quick sale, to anybody, at any reasonable price.Wall Street is hoping for a quick sale, to anybody, at any reasonable price.
“We continue to believe that one of the greatest risks in the stock is the core being a ‘melting ice cube,’ as a prolonged sale process draws on, creating questions for employees, advertisers and partners,” wrote Robert Peck, an analyst with SunTrust Robinson Humphrey, on Wednesday.“We continue to believe that one of the greatest risks in the stock is the core being a ‘melting ice cube,’ as a prolonged sale process draws on, creating questions for employees, advertisers and partners,” wrote Robert Peck, an analyst with SunTrust Robinson Humphrey, on Wednesday.