
Yahoo to Spin Off Its Core Businesses - _stephan
http://www.nytimes.com/2015/12/10/technology/yahoo-alibaba-spinoff.html
======
chollida1
Yahoo had to do this. They had been hanging onto the belief that the IRS
wouldn't tax their Alibaba spin out, a belief that they and their tax
accountants alone believed.

Most telling is that Yahoo was up after the markets closed on this news. Heck
Bloomberg just sent me a note saying the sentiment of the news on Yahoo was
very positive, even the machines like this news:)

Sadly this probably means 3 things are going to happen in the next 6 months:

1) The CEO leaves, and is replaced by an interm CEO from a PE firm who will
negotiate the wind down of Yahoo.

2) There will be a lot of companies coming to look at Yahoo. If a deal can be
done quickly then I don't think there will be layoffs right away. If no deal
can be reached quickly then in 6 months I'll bet there is a very large round
of layoffs as the company shutters what it can't sell to make the rest of
Yahoo look more appetizing.

3) If Alibaba buys the holding portion of Yahoo( Alibaba and Yahoo Japan) then
look for Alibaba to seek to acquire the rest of Yahoo Japan.

From teh article:

> Yahoo’s shift in strategy comes as Ms. Mayer and her husband, Zachary Bogue,
> are expecting the birth of twin daughters this month

I hope she takes a full year off, if not more. The past 4 years couldn't have
been easy on her. It will be interesting to see what she does next.

It's clear she's great at product design and not so good at people skills.
Unfortunately, that doesn't fit well with becoming a CEO again.

~~~
kaizendad
This is cleverer than people are giving them credit for. It delivers immediate
value to shareholders; it delivers opportunities for long term growth to
shareholders; it creates one valuable Asian property that can acquire other
properties and continue to deliver shareholder value; it creates a US company
that is easier to acquire than it used to be, without the Alibaba share, and
thus could be bought by a big media company that values all the core assets
and will keep the engineers.

Everyone wins here. Managers win, of course, but shareholders, who have been
patient, get short-term returns and the potential for long-term ones as well.
Employees will see their jobs stay, because of this repackaging.

Yes, Mayer will be gone in a year, replaced by someone with experience selling
a company. But it's been a good run. She turned Yahoo from a place with
mediocre engineers into a decent place to work; she resuscitated existing
brands and gave them a place in the world; and now she did some reasonably
clever financial engineering.

~~~
charlesdm
Did she? Maybe I'm a bit more sceptical, but what did she actually achieve?

1\. She failed at putting Yahoo back on the map. She spent billions on
acquiring businesses that bring in close to no revenue. Maybe it's a great
place to work, but if there's no money coming in, it won't stay great long.

2\. She failed at financial engineering; she couldn't even get a tax free
spinoff through.

I would've been happy to cut her some slack if she did one of these things
right, and messed up the other one. Some people aren't meant to be product
people and others just aren't financial engineers. But this is basically
throwing in the towel.

Don't forget, this idea of a reverse spinoff didn't come from Marissa. It came
from an activist investor, who are basically, master financial engineers.

~~~
mkagenius
> 2\. She failed at financial engineering; she couldn't even get a tax free
> spinoff through.

She managed to keep a part of Alibaba stake. This reverse spin off will also
be tax free.

~~~
charlesdm
She's throwing the company away she is currently CEO of.

The BABA stake had to be separated from Yahoo, but this is literally the worst
possible way, aside from selling the shares + paying taxes, to achieve this.

~~~
jackgavigan
What's so bad about it? The end result is the same as the original plan - one
company with a stake in Alibaba, and another company with Yahoo's core
businesses and the Yahoo Japan stake.

~~~
TheOtherHobbes
It's reminiscent of the endgame at HP, where the formerly profitable
PC/printer division has been split off from Enterprise - possibly in an
attempt to keep at least one afloat.

That's not proof of badness, but it does suggest desperation and lack of
imagination.

~~~
jackgavigan
_> It's reminiscent of the endgame at HP..._

It's completely different. Yahoo is not splitting up its core businesses.

They're taking a non-core asset (the Alibaba stake) that they can't sell
without incurring a huge tax bill, and separating it from yahoo Core so that
they can hand it over to Yahoo's shareholders (presumably in the hope that
someone else - e.g. Alibaba - will step up to acquire it, thus unlocking the
value for the shareholders), and re-focus on Yahoo's core businesses again.

There is a separate issue that the core of Yahoo is performing poorly, and
that fact may well result in Yahoo Core being split up and sold off but it's
important now to conflate the two issues.

------
FussyZeus
Oh just give this poor old dog the old Yeller treatment already. I don't know
what's more sad, the fact that Yahoo has fallen from where it once was, or
that it's falling so slowly and that it's new CEO, once thought to be it's
saving grace, is letting the bleeding continue for seemingly as long as she
possibly can.

I can't imagine the morale issues in the trenches of Yahoo, it's gotta be just
horrible in there.

~~~
mattlutze
As a sidebar, I've always kinda felt the name gets in the way.

Yahoo!

I feel silly saying it. I feel silly asking someone if they Yahoo!? It feels
silly seeing it on stock tickers. Do I want to invest in a silly business?
Work for a silly business?

The answers are yes and yes in an objective world, if the company is producing
interesting products that are selling. But when it comes to marketing to
users, investors and future employees alike, I'm not so sure it isn't a small
hurdle in the way of that conversation.

~~~
coldtea
> _Yahoo! I feel silly saying it. I feel silly asking someone if they Yahoo!?_

Yeah, nothing like the gravitas and seriousness of Google.

~~~
SteveNuts
"Google it" rolls off the tongue a lot better than "Yahoo it". Plus with
Google's minimalist design (at least in the early years) they can get away
with the silly name.

~~~
coldtea
All those are after the fact explanations. When Yahoo! ruled the web -- and I
was there for those years back in the mid-late nineties when it was as big as
Google is now -- the name clearly wasn't a problem.

------
3pt14159
So I don't understand one simple thing: The stock is up 120% since Mayer took
over. Even adjusting for compounding interest over 3.43 years, this is like
25+% yearly growth. So the core business is crapping out? So what? Why is
everyone dumping on Mayer? I don't even think I could fix the core Yahoo
business. They have to pay a 50% premium for developers just because it's
Yahoo and their core audience is the technically illiterate; a group that is
fairly difficult to monetize.

~~~
1024core
> The stock is up 120% since Mayer took over.

All of that is because of $BABA. If you add up the current value of $BABA and
Yahoo Japan shares that Yahoo holds, it's _more_ than the market cap of Yahoo;
which means, the $4B/year revenue business that is rest of Yahoo is valued
negatively by the market. SMH....

------
vonklaus
Paul Graham's _What happened to Yahoo_ [0] is probably just as relevent now as
when he wrote it in 2010.

> One of the weirdest things about Yahoo when I went to work there was the way
> they insisted on calling themselves a "media company.

That was a bad decision then, but at the time content and media were newer on
the internet and had value. They don't anymore. Yahoo finance and fantasy
sports are nice things to provide, but they aren't a google killer for sure.

Yahoo's core business is _media_ not technology. If the NYT and Wall Street
Journal are any indication, media is a bad business to be in.

[0][http://www.paulgraham.com/yahoo.html](http://www.paulgraham.com/yahoo.html)

~~~
strictnein
Wish I could find the article I read this in (googling around has failed me),
but I believe around 2010 they also started bringing in execs and business
people from Hollywood/MSM and there was a big clash of cultures.

~~~
T-A
The first Hollywood connection surfaced by my quick googling is the Semel arc,
2001-2007:

[http://www.cnet.com/news/yahoos-ceo-reaches-out-to-
hollywood...](http://www.cnet.com/news/yahoos-ceo-reaches-out-to-hollywood/)

[http://www.cnet.com/news/google-vs-yahoo-clash-of-
cultures-1...](http://www.cnet.com/news/google-vs-yahoo-clash-of-cultures-1/)

[http://www.wired.com/2007/02/yahoo-3/](http://www.wired.com/2007/02/yahoo-3/)

[http://metue.com/06-18-2007/yahoo-ceo/](http://metue.com/06-18-2007/yahoo-
ceo/)

The Wired article looks particularly painful. If memory serves, Yahoo first
declined to buy proto-Google for one million. Then again in 2002 for 5
billion.

~~~
jleader
Pretty much everyone with a million dollars laying around declined to spend it
on acquiring Google back then, it's not like Yahoo was the only company they
approached.

------
cronjobber
Respect, old boy Cringely actually got this one right:
[http://www.cringely.com/2015/11/30/soylent-green-now-made-
wi...](http://www.cringely.com/2015/11/30/soylent-green-now-made-with-more-
women/)

~~~
trimbo
Thanks for posting this. Great analysis about IBM and Google Cloud in this
article as well.

~~~
selimthegrim
[http://www.cringely.com/2015/10/21/why-yahoo-is-worth-
less-t...](http://www.cringely.com/2015/10/21/why-yahoo-is-worth-less-than-
nothing/)

------
spinchange
To come in as an outsider and try to save an ailing web giant nearly everyone
had already written off is no easy feat. Wall St. is valuing things like
Tumblr at zero and so now she has to do a 180 and unwind this company,
maximally and efficiently, while pregnant with twins. Naturally we're inclined
to armchair QB, but I think the hand she took over when she sat down at the
table was bad. While she never went "all in" on a moonshot, that would have
been a literal gamble, and she played smart. Wall Street can be inefficient.
Core Yahoo is worth more than nothing.

~~~
forgetsusername
> _To come in as an outsider_

She's a Silicon Valley darling; in what way was she an outsider?

> _I think the hand she took over when she sat down at the table was bad._

I agree with this.

> _she played smart_

But not this. During her tenure the company treaded water for a few years,
lost nearly all value, and now might be looking to break itself up. Is this
the standard we should be holding high-profile, high-priced executives to?

~~~
spinchange
An outsider _to Yahoo,_ not Silicon Valley. This feeds into point 2. She
didn't make Yahoo a media company, it was already one when she got there.

The smart part is meant as not gambling on a Carly Fiorina-type merger to
"save" the company. Her deals were smaller and focused, and my contention is
she didn't blindly throw capital around (at least in a way that makes
headlines) to try to save the company. Value is decided by the capital
markets, and I still believe core Yahoo is not worthless, whatever it's
problems or other management issues.

(edits for spelling, slight re-phrasing of last point)

~~~
sremani
What I consider her accomplishments, 1\. Firefox deal 2\. NFL Live on Yahoo!
3\. negotiating out of the search agreement with MSFT is considered as
accomplishment by some (not by me)

If Ms.Mayer is able to sell Yahoo! assets to Google in a profitable way for
shareholders, that would be a WIN, without it, her regime is a failure not a
total failure, but a failure none the less.

~~~
spinchange
They could also try sell to private equity, or someone like John Malone &
Liberty Media. I think even a separate capital stock of the core assets would
force more value recognition than what shareholders are seeing now, even as a
low priced issue. I'm not sure that Google would want anything here that they
couldn't build themselves or don't already have the lead on, but if there's
any interest, Yahoo should solicit those offers.

~~~
sremani
Yahoo Search and Yahoo Mail are two assets that GOOG and MSFT would be suitors
for. MSFT/MSN looks like a good suitor too, but you never know. From Mayer's
side, since she is Google alum, there can be something out there.

------
username223
When Yahoo finally dies, my main concern is what happens to the @yahoo.com
email address I've had for a couple of decades, and which now lives next to my
name in countless address books. Does it perpetually forward to an address I
choose? Does Yahoo try to charge for this? Do Russian identity thieves buy the
domain and make my life hell?

~~~
drgath
Entirely dependent on who decides to buy Y! Mail. Safe to assume it'll be
around for a while though, since straight killing Y! Mail doesn't make much
business sense.

~~~
mortenjorck
If Yahoo could find a way to start charging for legacy Yahoo email addresses
without enraging a sufficient portion of the installed base, they could have a
pretty lucrative business right there.

------
jonknee
Marissa Mayer and Maynard Webb were on CNBC this morning talking about the
spin:

Part 1:
[https://amp.twimg.com/v/76b8a5e2-9a6c-40c3-9c1b-e2c8bcf91159](https://amp.twimg.com/v/76b8a5e2-9a6c-40c3-9c1b-e2c8bcf91159)
Part 2:
[https://amp.twimg.com/v/ce42d263-7b9c-4716-8d06-b320ed243606](https://amp.twimg.com/v/ce42d263-7b9c-4716-8d06-b320ed243606)

Mayer seems completely bored by the whole thing and keeps passing stuff off to
Webb as "board level consideration". Doesn't make me excited for Yahoo
whatsoever.

~~~
profeta
OTOH if the CEO is excited about a tax shenanigan i will not be excited by the
company.

~~~
jonknee
Yahoo's stake in Alibaba is by _far_ the most valuable part of Yahoo. The "tax
shenanigan" itself is worth more than Yahoo's core business! If she can't get
excited about the majority of shareholder value she needs to step down ASAP.

~~~
profeta
because the CEO can do so much more than an accountant?

do you also fire your doctors because they don't pray?

the CEO should be rallying troops and making deals. well, at least that is the
excuse for their obscene salaries and bonuses.

~~~
jonknee
> the CEO should be rallying troops and making deals. well, at least that is
> the excuse for their obscene salaries and bonuses.

She looked like she was asleep. Wasn't rallying anyone or making any deals.
Did you watch the interview? She was talking about the most important thing
she has ever done as a CEO and couldn't care less. She has checked out.

------
crudbug
Yahoo management lacks vision. They had the most popular brand names in social
media space, still couldn't innovate.

1\. Messenger

2\. Mail

3\. Flickr

4\. Tumblr

~~~
profeta
the funny part is, if you mixed messenger, mail and flickr (let's not forget
geocities, delicious and 60% of all online stores before 2006) they could have
what facebook is still trying out to be and then some.

~~~
crudbug
True ! This makes the argument event better :)

------
benmorris
I never understood farming out their search engine to Bing in the first place.
Google literally prints money with their adwords search business. Seems
instead of attempting to innovate they just threw in the towel and gave up? I
just find it hard to believe that Google is the only way you can run a
successful search engine.

~~~
lmm
Google's search engine runs at a loss to support their advertising business,
and haven't had any serious competition in that sector since they bought
Doubleclick (which looks a bit antitrusty in my eyes but what do I know).
Yahoo doesn't have much of an ad business so there's not a lot of value in
running their own search. They're good at their core business of being a
portal, with some parts implemented themselves and some parts external (or
semi-external e.g. Flickr) integrations.

~~~
AznHisoka
That's perhaps the most twisted/obtuse definition of "running at a loss".

Without their search engine, there is no advertising business.

~~~
lmm
Yes there is. A lot of Google's advertising business is selling ads on other
people's sites, and they use the information from their search engine to
target that; they could run the ad business without it (using data from Google
Analytics and elsewhere) - after all it ran as an independent business when
Doubleclick owned it.

My understanding is that if search and ads were separate businesses and ads
paid search for search result ads at market rates then search would not be
profitable (similarly for e.g. Gmail). (In reality if search were an
independent company then it might be able to be profitable by selling
information to ads in addition to direct advertising revenue - OTOH the legal
barriers to selling information to a third party might make that impractical,
whereas conveniently they're not an issue while Google remains a single
company)

~~~
jknightco
According to their 10K [1] 76% of their advertising revenue and 68% of their
total revenue comes from advertising on Google properties. Reducing their
revenue by 76% surely wouldn't allow them to "run the ad business without it."

[1] Page 24,
[https://investor.google.com/pdf/20141231_google_10K.pdf](https://investor.google.com/pdf/20141231_google_10K.pdf)

~~~
BinaryIdiot
> 76% of their advertising revenue and 68% of their total revenue comes from
> advertising on Google properties. Reducing their revenue by 76% surely
> wouldn't allow them to "run the ad business without it."

While I don't agree with the parent you're implying that search is the ONLY
Google property that displays ads but that's not true. A decent percentage of
that is coming from gmail. I'm not sure how much however.

------
pmlnr
The one and only question I need to ask: will flickr stay alive?

The rest had been obsolete for a while anyway.

~~~
jscheel
Guessing we are either going to see major changes in pricing structure, or a
shutdown of Flickr. Pretty bummed.

~~~
ghaff
Hard to say. There isn't a lot of direct competition. Smugmug probably comes
closest (and I see their current pricing structure again makes it reasonable
for non-professionals which it wasn't for a time). It really depends on how
many people pay for a premium ("pro") flickr account which Yahoo seems to have
been fairly ambivalent about collecting over the past few years.

Personally, I'd find it something of a bummer if flickr were to go away or
seriously decay. I could switch but it would be a definite pain. (I also find
flickr a great source of CC photos.)

~~~
pmlnr
I've been running my own site for displaying images; for backup, I have a
dedicated server + synthing.

It's the archives I'd really, really miss, from people who more or less
stopped taking photos.

If Flickr was to offer what Smugmug and 500px does for pros ( like direct
upload from Lightroom, eyecandy portfolios, etc. ) instead of focusing on an
app that uploads every picture it finds by default, I believe they'd see a
return of the many and probable could become profitable. But this would need
immediate and massive changes, which I don't think will happen at all.

~~~
DannoHung
Flickr has direct upload from Lightroom...

Actually, I think that's built in to Lightroom.

~~~
pmlnr
Lots of thing have Flickr upload; it was just not build by Flickr itself,
supporting the professional photographer culture in the first place.

------
peteretep
So they're selling Alibaba, but doing it the other way around.

------
wiremine
Honest question: what has been Yahoo's core business for the last 15 years?

~~~
carrier_lost
Their latest quarterly report summary offers plenty of details:
[http://biz.yahoo.com/e/151105/yhoo10-q.html](http://biz.yahoo.com/e/151105/yhoo10-q.html)

~~~
alanning
Thanks for the link. Here's the description from their Overview (cleaned up a
bit):

"Yahoo! Inc., together with its consolidated subsidiaries is a guide focused
on informing, connecting, and entertaining our users. By creating highly
personalized experiences for our users, we keep people connected to what
matters most to them, across devices and around the world. In turn, we create
value for advertisers by connecting them with the audiences that build their
businesses. For advertisers, the opportunity to be a part of users' digital
habits across products and platforms is a powerful tool to engage audiences
and build brand loyalty. Advertisers can build their businesses through
advertising to targeted audiences on our online properties and services or
through a distribution network of third party entities who integrate our
advertising offerings into their websites or other offerings. Our revenue is
generated principally from search and display advertising."

Reading that was a bit strange to me as it doesn't fit with my image of Yahoo.
From that description, it seems they think of themselves as a social network +
ad platform. I'm finding it a bit hard to clarify what my image of Yahoo
exactly is but its not that.

------
aswanson
Yahoo purchased viaweb which made YC possible. The startup community owes
yahoo a lot.

~~~
mkagenius
Throw in Whatsapp too there then ;)

------
voltagex_
Again I ask, where should I take ~30GB of photos that I have on Flickr? Yes, I
have other backups but I need offsite storage. Guess I'll have to budget for
it now. Backblaze B2 isn't quite ready yet.

~~~
pmlnr
Serious answer: digitalocean gives you a 40GB VPS for 20$/m and you can spin
up an Owncloud instance in minutes.

~~~
BinaryIdiot
A single VPS for backing up photos? No thanks. Redundancy is going to cost you
a lot going this route.

~~~
pmlnr
He said there are backups already, this is just an addition.

~~~
BinaryIdiot
He was looking for an off site backup meaning all of his current backups are
at a single location. You need redundancy in your offsite backup (or have
multiple) otherwise you may have to use it one day and find the drive has died
or who knows what else.

------
sremani
Ms.Mayer took a very difficult job. There is no sense in feeling for her, she
knew what she was getting into and she was paid highly as if she already
accomplished a turn around. Every thing said and done, Ms.Mayer will have $400
Million, even if Yahoo as we know is Kaput. It is a demonstration that C-level
execs do not have skin in the game any more, they are paid like they already
accomplished the task they have set to.

------
netcan
I'm not sure I quite understand.

The article puts Yahoo's Alibaba stake at 31bn. Google finance is reporting
Yahoo's market cap as 32.75bn. Does this mean that Yahoo's non-Alibaba value
is a rounding error?

~~~
cmdkeen
It may be worth that but as stated in the article it can't be realised without
tax bill potentially up to $10bn.

~~~
netcan
OK. That makes a little more sense. The market might be valuing that at 5bn or
so.

~~~
fredkbloggs
If you work out the math, Yahoo could sell those assets, take the tax hit
(whether or not the tax is legally owed is irrelevant), then by shutting down
the entire company, hand its shareholders several dollars per share more _in
cash_ than the market currently values the share.

It's possible that some shareholders would realize significant capital gains
on that, and the taxes would offset part or all of the profit. But of course
other shareholders would not only make a profit, but would also have a fat
capital loss to go with it. It just depends on when they bought the shares and
what they paid.

Overall, though, when one factors in all the tax effects, the market is
assigning a negative value to Yahoo proper. Why? Because they, quite
reasonably, assume that Yahoo proper will chew up the cash that's currently on
the books and any that is obtained via asset sales. That is, should the
shareholders ever receive a dividend of any kind, it is likely to be the
current cash value of the company less some large fraction wasted between now
and whenever that might hypothetically happen.

Bluntly, if the company were being valued as a going concern, the market would
be pricing it a lot lower even than it is. The only reason for the share's
relatively high price is the expectation that some kind of spinoff will happen
to allow the shareholders to receive a larger fraction of the value of the
company's assets than they would if the company sold those assets itself and
used the capital to continue its own operations. In the latter event, one must
reasonably assume the ultimate return to shareholders would be very close to
zero (an eventual sale of the rotted carcass to private equity) or zero
(bankruptcy).

------
zingplex
It's almost as if Yahoo doesn't know what their core businesses are anymore.
It will be interesting to see if they come out of this with better
understanding of their identity.

~~~
petercooper
It seems clear to me. They're an investment business that owns shares in
successful companies.

~~~
tacos
Like Yahoo Maps, Yahoo Green, and Tumblr...?

~~~
xyzzy4
Tumblr is very culturally significant but not financially successful.

~~~
tacos
Like that time they told every one of their users that a pending bill in
Congress was going to kill Tumblr, set up robocalls that required a single
click, and achieved a 0.2% response rate?

------
ChuckMcM
Certainly the end of the beginning. Yahoo!, one of perhaps a handful of
companies, was the first "Internet"[1]. Those companies blazed an interesting
trail and brought the mainstream population of the US into the "online" world.
That they emerged across the chasm that was the dot.com crash, was a testament
to the amount of momentum they carried with them.

I have a tremendous amount of respect for them, but even with Marissa at the
helm the biggest challenge they have not seemed able to overcome, was to
tranform into something more 'web 3.0' ish.

I would not be surprised in the slightest if Microsoft spun out Bing as a
subsidiary, and absorbed the assets and IP of Yahoo! into their own search
centered business with a portal attached.

By resizing that combined business to be profitable based on the search and ad
revenue I expect the case could be made for that as a long lived entity that
remains when Google implodes. And having an already separate (or separable)
would allow Microsoft to step away to avoid anti-trust concerns while keeping
a partial interest to capture the value appreciation.

[1] the 0th Internet was what emerged right after HTTP started propagating,
GNN, bookmarks etc.

~~~
finnh
When/why do you expect Google to implode?

~~~
ChuckMcM
Google has been losing margin (hence profitability) in its search advertising
business that powers everything it does fairly rapidly over the last 6 years.
They have kept revenue/cash flow going/improving over that same period by
putting more and more ads on their properties, dumping things which aren't
making money, and trying really hard to push many of the moonshot projects
into profitability. During the same 6 years Microsoft has been reporting
growing margins on its search advertising business and Bing became profitable
for the first time not too long ago.

The issue for Google is that while their search is good, Microsoft has crossed
over into the "good enough" space (for the customers, advertisers) and the
product (people using the service) are less and less likely to force switch
the search engine default to Google. Worse, the back stop efforts that Google
has been doing to protect revenue growth have caused many long time users to
become dissatisfied with their user experience. Google's portal portfolio
(News, Finance, G+, Pictures, and Blogger) and cloud offering (GCE) have not
kept up with other offerings in the space they are losing share.

All of that summarizes to "web services are becoming commodities" and while
profitable (as Bing has demonstrated) it's not going to continue to be
profitable enough for Google to do that and any of the other projects that 90%
of the other employees work on.

So first Google will start reporting down quarters because no matter how many
ads they cram on a page it doesn't improve their RPM, then start cutting
projects internally left and right to cut costs, and then they start cutting
more of the benefits, and then they start downsizing groups to stay within the
'profitable' envelope, and like a main sequence star that has run out of
hydrogen to burn, the collapse to white dwarf has begun. What Alphabet does at
that point will be interesting, but their margins on the G business will only
be sufficient to support the G business and not anything else. If they aren't
making any money elsewhere then poof.

So when? Can't say, really it depends on them being able to pull out into a
sustainable business model on the lower margins of commoditized search. Google
seems to understand the threat to the business (given their moves, like
Alphabet, changing CFOs Etc.). And they are really smart so if there is a way
out they may be able to find it, and they have enough cash to "coast" for a
long time (look how long Yahoo has coasted right?) But a lot of these things
end up being additive, the shine goes off of working there, a lot of solid
people leave and then you can lose the ability to change fast enough to avoid
your fate.

Companies that pull it off (re-inventing themselves) are much rarer than
companies that auger into the ground.

~~~
mschuster91
> Google has been losing margin (hence profitability) in its search
> advertising business that powers everything it does fairly rapidly over the
> last 6 years. They have kept revenue/cash flow going/improving over that
> same period by putting more and more ads on their properties, dumping things
> which aren't making money, and trying really hard to push many of the
> moonshot projects into profitability.

Google is trying to pull off a Saudi Arabia: make as much profit as they can
and pour said profits into R&D (tourism) so that when the time comes and
people are not interested as much as now in AdWords (oil), the "moonshot"
investments will have unlocked new sectors where profit can be made.

~~~
ChuckMcM
I don't know about Saudi Arabia's plan but pretty much Google is in a 'find
something else or die' mode. We'll see.

------
ddlatham
What's the difference aside from the tax liability? Either way you wind up
with two companies. One with the Alibaba shares, and the other with everything
else.

~~~
jackgavigan
There is no difference aside from the potential tax liability but the tax
liability is potentially huge. We're talking over $9bn.

Matt Levine wrote a good piece on this a week ago:
[http://www.bloombergview.com/articles/2015-12-02/yahoo-is-
lo...](http://www.bloombergview.com/articles/2015-12-02/yahoo-is-looking-for-
a-new-way-around-alibaba-taxes)

~~~
ddlatham
Totally agree that any shift in the tax liability is significant. But people
seem to be discussing many other consequences now:

Does this mean the end of Yahoo?

Is it being acquired?

Are they shutting down Flickr or Tumblr?

Why would this change make any difference to those questions?

~~~
jackgavigan
_> Why would this change make any difference to those questions?_

I don't think it does. I think the difference is that Starboard suggested that
Yahoo sell its core business - [http://www.wsj.com/articles/starboard-urges-
yahoo-to-drop-al...](http://www.wsj.com/articles/starboard-urges-yahoo-to-
drop-alibaba-spinoff-plan-1447905535) \- and Verizon's CFO suggested that they
might be interested in buying Yahoo Core if it was put up for sale -
[http://www.bloomberg.com/news/articles/2015-12-07/verizon-
wo...](http://www.bloomberg.com/news/articles/2015-12-07/verizon-would-
explore-yahoo-deal-if-it-made-sense-cfo-says)

~~~
ddlatham
Right, it sounds like you agree with me. But most of the rest of the comments
on this article suggest this is a significantly meaningful change.

------
barretts
Any reason I shouldn't see this as a complicated tax dodge? Simply more
multinational pilfering from public coffers? Why _shouldn 't_ the Alibaba
capital gains be taxed?

~~~
fredkbloggs
I assume your question was intended as rhetorical, but there's an actual
answer to it: because when the owner of the Yahoo stock (or a hypothetical
Yahoo holding company for Alibaba stock) sells his shares, he will pay tax on
his gain from that holding.

To turn the question on its head: why should some capital gains be taxed twice
and others once (or in rare cases, three times or not at all)?

------
jackgavigan
I thought Yahoo's stock price would rise on this news (because it removes the
uncertainty that was overshadowing the original Aabaco spin-off plan) but,
despite a brief opening spike, the stock is down on yesterday's close.

On the conference call this morning, the management team sounded really
downbeat. I expected them to sound positive and optimistic, talking about
unlocking shareholder value and focusing on Yahoo Core but they sounded like
somebody had died.

As of this moment, the market value of Yahoo's stakes in Alibaba and Yahoo
Japan are $32.5bn and $8.67bn respectively, while Yahoo itself has a market
cap of $32.37bn.

To quote Matt Levine, "the whole point of Yahoo as a company right now is to
not pay taxes on Alibaba. [...] If there was a way to avoid paying taxes on
the Alibaba shares that involved burning all of Yahoo's actual businesses to
the ground, Yahoo should do that all day long, and then do it again the next
day. It would still add shareholder value."

"And the market, right now, is valuing Yahoo as though it will fail in that
mission, which is its only mission."

Source: [http://www.bloombergview.com/articles/2015-12-02/yahoo-is-
lo...](http://www.bloombergview.com/articles/2015-12-02/yahoo-is-looking-for-
a-new-way-around-alibaba-taxes)

------
kzhahou
What's this mean for a company like Polyvore, acquired a couple months ago?

------
epmatsw
I wonder what will happen to their fantasy football product. It's wayyyy
better than their competitors

~~~
rchaud
It is odd that Yahoo's stake of the fantasy sports market constantly goes
unmentioned while daily fantasy startups like Draft Kings is currently bathing
in VC cash and media coverage.

~~~
jonknee
> daily fantasy startups like Draft Kings is currently bathing in VC cash and
> media coverage.

They're currently bathing in legal battles and will probably be out of
business in very short order. It's a liability for Yahoo, not an asset to brag
about.

~~~
rchaud
That depends. I thought the same thing would happen to Uber, but they've used
their rapid growth and VC money to fund lobbying efforts to change the laws
around taxi regulation. As I understand it, these FF startups are attempting
to exploit similar loopholes in Internet gambling laws as a short-term fix
while they lobby to change the law in their favor.

~~~
jonknee
Uber was never declared illegal gambling by multiple US attorney generals.
They fight corrupt local politics, not well tested gambling laws. The only
reason the execs aren't in jail already is because they have very well
connected investors (which helps Uber as well!).

[http://www.nytimes.com/2015/11/11/sports/football/draftkings...](http://www.nytimes.com/2015/11/11/sports/football/draftkings-
fanduel-new-york-attorney-general-tells-fantasy-sites-to-stop-taking-bets-in-
new-york.html)

~~~
sospep
fantasy football is a game of skill, NOT a game of chance

------
craigasketch
Is this a harbinger for darker times to come? Or is it simply Yahoo's time
finally? I think there is still value in Yahoo it's just expectations vs
market reality to me are at odds. I don't know what I'll set my grandma's
homepage to now.

------
aswanson
Watching Mayer on CNBC right now. Really sad, she has that 1000 yard stare
look in her eyes.

~~~
thomasjudge
I don't like this expression, but weren't the "optics" of that just terrible?
She looked and sounded really really tired. The Chairman is not telegenic AT
ALL. And they were sitting about as far apart from each other as possible
while being at the same desk.

~~~
aswanson
Yeah, the body language, positioning, phrasing....her constantly referring to
what the board was going to do..it was just a bad look.

~~~
sirkneeland
She probably IS really tired (between the demands of pregnancy and the late-
night boardroom fighting).

And she's probably dealing with a lot of anger around not getting to do her
turnaround. Whether they were working or not, she was surely emotionally
invested in her efforts to rebuild Yahoo as a company and now that is being
rejected.

It's devastating when you are pouring your heart and soul into something and
then the company just kills it and it's beyond your control. I'm sure a lot of
us have been through that (I've been through it twice now, at Palm when HP
killed webOS, and at Nokia when they announced they were giving up on phones),
and I don't think it's any easier at the top level.

Though those eye-watering golden parachutes can't hurt...

~~~
nickpsecurity
That's how Im reading it. She put up a great fight and did better than I
expected her to do. Every aspect of the job would've been a fight. I'd have
only done it if I was paid plenty on entry and exit. She's gonna need quite a
vacation after this.

------
panglott
[https://en.wikipedia.org/wiki/List_of_Yahoo!-owned_sites_and...](https://en.wikipedia.org/wiki/List_of_Yahoo!-owned_sites_and_services)
What a graveyard.

------
ebbv
So now Yahoo stock is basically going to be a faux Ali Baba stock. This
totally seems like a healthy thing and evidence that there is nothing at all
wrong with our market system.

~~~
colinplamondon
This seems like an unprecedented situation. They much set $25,000,000,000 on
fire at the same time that they made $29,000,000,000 on a great investment.

A company makes an amazing, generation defining large bet on a startup in a
fantastic market. Which pays off as one of the best investments in history.

That same company then proceeds to do _nothing_ with its actual business. It
purchases a series of tiny startups that go _absolutely nowhere_, the acquired
talent of which create _zero value_.

And, simultaneously, new, younger competitors start eating their lunch in
every one of their established markets.

If that's not unprecedented, I'd love to hear the other example. That
situation would have to be just as fascinating.

------
joefarish
It's core business is owning Alibaba shares, no?

------
dothis
Do you guys think our emails on Yahoo mail are safe after this? I will backup
mine as soon as I find the time to do so.

Yahoo has a terrible track record regarding emails. I already lost one due to
inactivity. They gave it to somebody else. That somebody probably has access
to several of my accounts now. On websites where I used my Yahoo address and
then just forgot about it.

------
ArtDev
Yahoo bought my favorite task manager, and killed it. Yahoo bought Flickr, and
has been slowly killing it for years.

Yahoo bought delicious.com, said they were going to kill it, but later sold
it. Most of the users that left never came back.

Has Yahoo done anything worthwhile in the last 15 years besides disrupt
innovation in a bad way?

~~~
ghaff
In the case of delicious, in all fairness, the whole tagging/folksonomies
thing ended up being pretty much a passing fad. (Though I do use pinboard
myself and find it useful.)

------
mmanfrin
Wait, so since they can't spin off the Alibaba stake tax free, they're going
to spin off Yahoo (and pay taxes on that lesser-valued spin off)? Shareholders
would then own 'YHOO' which are basically BABA pass-through stocks, and
whatever other company Yahoo becomes?

------
clavalle
Yahoo is the Motorola of the Internet Sector.

Always playing catch up in an industry that is lead or die. Good to great
engineers with failed leadership trying to coast on past success then, when
the stuff hits the fan, trying to effect a culture change on a bloated
structure. Finally, the sell off.

~~~
sirkneeland
Also add Palm, BlackBerry, Nokia to that list...

------
ShardPhoenix
"The decision not to sell the Alibaba stake, which was reported on Tuesday,
was driven by “the market’s perception of tax risk” associated with the
Alibaba plan"

It's unfortunate that the tax code is so complex that ambiguous "tax risk" is
a thing.

------
poofyleek
Yahoo Core Business valuation is at this point low enough that any one of the
Unicorns, e.g. Uber, Airbnb,... could easily afford it. Tumblr could have
raised more money to become a bigger Unicorn and could have acquired Yahoo.
Absurdity is reality.

------
intrasight
Used Yahoo paid email for several years in the 00s. I've not used Yahoo for
anything else. Never did understand what is their business model.

~~~
profeta
remember how you used everything form yahoo when you were first online? well,
there are billions of people just getting their first online experience.

------
yeukhon
Can someone explain why do business like to create new company? What are the
benefits for the financial return other than having a book reporting
individual revenue? In the end, aren't they going to be under the same parent
company, which, if one wishes, can actually challenge and even overrule the
child company CEO's decision behind the scene? HP, Google, now Yahoo.

~~~
swingbridge
Sometimes companies have one business that's doing quite well and another
that's a real stinker. Shareholders may want to own the good business
separately and let the market value that without the drag and risk of having
the stinker weighing down on it. In the end the stinker is either dismantled,
taken into bankruptcy or sold off.

In Yahoo's case it's a bit unique in that the only thing they really have that
the market likes is their holdings in other companies. Essentially Yahoo is
like a mutual fund that made some good investments but the fund managers are
blowing it by running a poorly performing lemonade stand on the side. A lot of
the investors just want the holdings and then are happy to let the stinker,
Yahoo's original business, just go away. At the moment the market assigns the
core business a negative valuation so it's beyond a stinker, it's an anti-
company offsetting the value of investment holdings elsewhere under the
corporation. It's a real mess.

------
crudbug
Zuck - If you are here .. Buy Yahoo for Max,

Trust me, you will thank me later. :)

------
pitt1980
what multiple of its earnings was Yahoo trading at at the height of its glory?

given that we now know the postscript (or at least much of it)

did that multiple make any sense?

~~~
ghaff
Undefined. Yahoo was one of the first big Internet companies in the late 1990s
to make you shake your head and go "This must be a bubble." They had some
ridiculous valuation at a time when they were losing money so P/E doesn't mean
anything.

------
mgalka
What I want to know is, how has Yahoo lasted so long?

Google has beaten them at search, maps, email, and news. And their homepages
is still confusing web 1.0 jumbled mess.

What do people still use Yahoo for anyway?

~~~
spikels
Yahoo's survival is a legacy of it's huge success in the late 1990s when it
was the most successful company on the Internet. You are likely young and did
not experience Yahoo's almost Google like dominance at the time.

First, while Yahoo's core "portal" business model was losing market share to
search (i.e. Google) the overall market for online advertising was growing
rapidly which masked it's weakness for many years.

Second, it invested it's huge early profits into the growing Internet both in
the US and internationally. Most of these investments were failures but two
were HUGE successes: Alibaba and Yahoo Japan.

Yes, Yahoo is a declining platform but still has millions of users for all of
the things you list. Like it predecessor AOL there is a very long tail as
people are creatures of habit and don't like to change email or start page,
etc.

~~~
mgalka
I am old enough to have a yahoo.com email, which I suppose proves your point.

------
PaulHoule
It might be better if Merissa Meyer took a long maternity leave.

