The core Web business has been flagging for quite some time, dropping from Microsoft’s $44.6 billion valuation when it offered to acquire Yahoo in 2008, to around $4 billion in today’s market. That puts it in perfect territory for a buyout, and rumors claim private equity and telecommunications firms are interested.
Yahoo might not sell, but there is not much left of the Web business that is worth keeping. Mail is far behind Gmail and Outlook, Search is far behind Google, Messenger is far behind WhatsApp and Snapchat, and Shopping is far behind Amazon.
It isn’t set in stone that the spin-off will happen, chief executive Marissa Mayer said they would have to consult shareholders, U.S. regulators, and business partners before making a final decision. However, the board has been more hesitant toward Mayer’s plans in the past six months, as they start to question the CEO’s performance over the past three years.
The main source of value for Yahoo lies in the hands of other companies, like Alibaba and Yahoo! Japan. It has a 15 percent stake in Alibaba worth $30 billion and a 35 percent stake in Yahoo! Japan, worth $8.5 billion. If the Web business sells, Yahoo’s shareholders might be more worried about the performance of Alibaba or its Japanese web portal, than any new projects Mayer is trying to push.
We don’t know the finer details of what divisions will go into the Web business. Tumblr, Flickr, and its media division might remain with the company, while its older and less valuable assets are pushed into the spin-off, or we might see them all thrown into the separate company.
