Yahoo! Searching for a future

Yahoo!

Searching for a future

Nov 9th 2011, 12:14 by M.G. | SAN FRANCISCO

     

IF YAHOO! had its own personal profile on Facebook, its relationship status on the social network would read “It’s complicated”. Two months after booting out Carol Bartz, its chief executive, the internet giant is flirting with a number of investors and firms that would love to get their hands on some or all of its assets. At the same time, Yahoo! is still keeping the option open to go it alone. On November 8th the company struck an online-advertising alliance with Microsoft and AOL, another web firm, in its latest bid to bolster its fortunes.

As one of the web’s best-known brands is searching for a future, it offers a spectacle that involves huge war chests and equally inflated egos. Among the potential suitors(请愿者) are some of the world’s most prominent private-equity groups, including TPG（Texas Pacific Group） Capital, Providence Equity Partners and Silver Lake Partners. Google, Microsoft and other big tech companies are also said to be sniffing around(嗅探) the firm, as are other investors such as Andreessen Horowitz, an ambitious venture-capital outfit. Jack Ma, the effervescent boss of Alibaba, a prominent Chinese internet firm in which Yahoo! has a stake of roughly 40%, is also keen to buy his American partner.

It is hardly surprising that Yahoo! is attracting so much attention. Aside from its search business, the firm boasts other assets that make it a tempting target. Chief among them are its Asian holdings, which also include a 35% stake in Yahoo! Japan. In addition, the company has a large e-mail operation with some 300m users, as well as successful online services in areas such as sport and finance.

If Yahoo! now is in a state of limbo（迷失）, it is because Ms Bartz was unable to exploit these advantages and mint（赚取） enough money to please the firm’s long-suffering shareholders. She also failed to arrest the worrying slide in the company’s advertising business. According to eMarketer, the web giant is likely to lose its lead in the market for online display advertising in America. (Display ads are popular with advertisers looking to build their brands online.) The research firm reckons that Yahoo! will end up with just over 13% of the market this year, while Facebook’s share will leap to more than 16%, up from around 12% in 2010.

This explains why Yahoo! is so keen to find ways to boost its ad revenue. Under the terms of this week’s agreement with Microsoft and AOL, the three companies will be able to tout（兜售） each other’s unsold display ads. Yahoo! also recently splashed out $270m for Interclick, a company whose technology is used to target ads at certain sets of users. This is just one of many areas where Yahoo! has been outflanked（挫败） by rivals such as Google and Facebook.

At the same time as it has been striking these deals, Yahoo! has been inking non-disclosure agreements with potential investors. One deal it has reportedly been considering is to spin off（甩掉） its Asian stakes and return the cash to shareholders. Another envisages what is called “leveraged recapitalisation（资本重整）”. It involves raising capital by selling a stake to outsiders and using it to buy back and retire other shares. The new investors would end up owning a greater share of firm than they initially bought. They could well form a big ownership block with David Filo and Jerry Yang, Yahoo!’s co-founders, who between them own about a tenth of the firm’s equity. The advantage of such a deal would be that it probably does not require shareholder approval.

Predictably, speculation is rife that Mr Yang, who is still a board member, has been promoting a leveraged recapitalisation in order to retain influence at the company. The possibility has raised the hackles of at least one big shareholder: Third Point, a hedge fund（避险资金）. In a recent letter sent to Yahoo!’s board, it lambasted（痛斥） the idea, arguing that it would “entrench management and transfer effective control [of Yahoo!] without payment of a premium or even, it appears, a shareholder vote”. Third Point also called for Mr Yang’s resignation as a director of the company.

Yahoo!’s board, whose members were memorably dubbed “doofuses” by the departing Ms Bartz, has dismissed Third Point’s criticisms. It says that the strategic review process “is being properly managed for the benefit of all shareholders”. Given the potential conflicts of interest involved, both the board as a whole and Mr Yang in particular will need to tread carefully in the days ahead. They will also need to move reasonably fast to resolve the uncertainty dogging the firm. If Yahoo! is going to be carved up like a turkey at Thanksgiving, the sooner such a decision is taken the better.