This morning I saw BreakingViews.com’s take on Yahoo!, via Valleywag via Paul Kedrosky, which builds upon Sanford Bernstein’s report that Yahoo! is not exactly maximizing value.
I have been covering Yahoo! (note: I own shares in the company) for some time and outlined my own strategic options, which include:
- status quo (a $100B market cap by 2010?)
- merger with eBay
- merger with Viacom
- merger with CBS
- acquisition by/merger with Microsoft
- taken private
- sale to AT&T
- can Google buy Yahoo!?
- Spin off ad network unit
Frankly, I’ve argued that Yahoo!’s main problem is simply operating in the shadow of Google, but I digress, Wall Street does know best and Yahoo!’s stock is in the gutter. Jerry Yang is a great guy, I am sure, but 200 days into his stint, something needs to change.
The chorus is growing louder, the momentum is growing fast: something is bound to happen in 2008, especially at these prices. Yahoo! is now worth $28B. That’s nothing to sneeze at, but then start to peel off the layers and something is wrong.
In the past month, more and more people are pointing out the obvious.
In December 2007, Valleywag asked “Is Yahoo really worthless” and highlighted:
Yahoo Japan, of which Yahoo owns a third, is worth $25 billion, putting Yahoo’s stake in it at nearly $9 billion. Alibaba.com, a Chinese e-commerce company in which Yahoo directly owns a 10 percent stake, is worth $17 billion. Tack another $1.7 billion on. That figure doesn’t include Alibaba.com’s parent company, Alibaba Group, which runs Yahoo China and in which Yahoo owns a currently illliquid 40 percent stake. Estimates of its value are running between $8 billion and $16 billion. Yahoo has other investments like G-Market. Add it up, and you realize that Yahoo’s wholly owned operations in America and Europe are valued by the market at next to nothing, especially compared to the multiples other Web companies are getting.
Then in early January (cause we’re obviously now in “mid-January), Sanford C. Bernstein added:
At $24.09, Thursday January 10th’s closing price, Yahoo has a market capitalization of $32 billion. When Jeffrey Lindsay, an analyst for Sanford C. Bernstein looks at the company’s $2 billion in cash, along with its holdings in Yahoo Japan, Alibaba (the Chinese e-commerce firm) and other entities it doesn’t run, he comes up with a value of $13.24 a share. That leaves a value of $10.51 a share for the actual business of Yahoo, making the value of Yahoo’s core business about $14 billion, or 7 percent of Google’s $200 billion market value.
Yahoo! is yesterday hit a 52-week low. Yes, I know, the economy. No one is immune to the economy, granted, but the counter thought is that there is always a bull market somewhere, and digital media is it, and display/banners and video will grow above average and this all means Yahoo! should too.
Yahoo! will face a shareholder revolt in the form of a hostile takeover some time in 2008. It might not be very hostile, frankly, because many of Yahoo!’s most senior shareholders have left, including its Chairman and former CEO Terry Semel. Furthermore, Yahoo!’s current CEO, co-founder Jerry Yang is the largest single individual shareholder and unlikely to want the chief Chief gig for very long.
What will happen in particular? I don’t know. But seeing Jana Partners et al. circle CNET and build up a 20%+ stake off the radar I suspect the same thing with Yahoo!, soon.
Any takers?
Disclaimer: Long YHOO
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