Tech

Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

Improbably, there have been five CEOs  of Yahoo in the last five years. And also improbably, the company's perpetual turnaround status remains unchanged.

That is a crucial lens through which to view news reports on on Tuesday that Yahoo will consider spinning off its Web business and some other assets to shareholders rather than pursue a complex spinoff of the company's stockholdings in Chinese e-commerce company Alibaba. This means Yahoo's core Web business could maybe possibly be for sale once the maybe possible spinoff of the Web business takes place first. Hooray? 

This eventually maybe sale process is dangerous territory for Yahoo because its operating business is getting worse in a hurry. The longer Yahoo waits to find a buyer, the less valuable it gets by the day

Also remember this company has been through protracted sale efforts that haven't led anywhere. Yahoo has a habit of repeating history. 

For a glimpse at the company’s “plus ça change” status, check out this paragraph about Yahoo from a 2012 Bloomberg News report. 

Thompson, CEO since January, embarked on the turnaround to reverse a three-year revenue slump and shore up a stock that has lost 10 percent of its value in 12 months. Yahoo’s failure to keep up with Facebook Inc. and Google Inc. in online advertising led to the ouster of former CEO Carol Bartz and prompted Chairman Roy Bostock and co-founder Jerry Yang to depart. Now the company faces a proxy fight with investor Third Point LLC.

We can play a game of Mad Libs, replacing the identities of Yahoo executives and the name of the activist investor poking the company in the eye. The broad strokes are the same.

Now as in 2012, a technologist is at the helm of Yahoo, trying to develop products to perk up revenue and reverse share declines. Yahoo today as then is having trouble making money from its still-massive Web traffic, while Google and  Facebook are rolling in dough. Yahoo then and now is burdened/blessed with valuable but tax-complicated stakes in Asian tech companies. Now as in 2012, an activist investor is pushing for a shake-up, and a proxy fight has been a risk.  

Purple Drain
Yahoo's net revenue has dipped and profits have been erased since Marissa Mayer took over as CEO.
Sources: Bloomberg data and Nomura estimates (for 2015 operating income)

Yahoo is like the tech world's version of "Groundhog Day."  Nothing ever changes. It was a charming plot for a movie but a terrible blueprint for a company. 

Scott Thompson (CEO No. 3 of 5 since 2011) had taken over after one of those will-they-or-won't-they-sell periods for Yahoo. With uncertainty again hanging over Yahoo's ownership status, how can employees and executives hope to end the perpetually unfinished fix-it project? Potentially interested buyers for Yahoo's Web operation also may have to bite their fingernails watching a company with declining revenue and profits fall further apart before Yahoo hits the auction block.

One wrinkle is a potential spinoff would set a value for Yahoo’s Web business without the question marks around how much the Alibaba and Yahoo Japan stakes figure in Yahoo’s current stock market value. Marissa Mayer, and her shareholders, may not like what they see. 

Nomura values Yahoo’s core business at $2.2 billion -- a value, including debt, of less than three times the company’s estimated 2016 earnings before interest, taxes, depreciation and amortization. That is the lowest multiple among 56 large Internet companies, according to Bloomberg data.

So yes, Yahoo needs start an orderly sale process. But a sale delayed is worse than no sale at all. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Really! Carol Bartz, Tim Morse (interim), Scott Thompson, Ross Levinsohn (interim), Marissa Mayer.

  2. Before the third act when Bill Murray learns to take advantage of his circumstances.

To contact the author of this story:
Shira Ovide in New York at sovide@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net