Yahoo's Loss Widens, No Bidders Step Up to Save It

By Chris Preimesberger  |  Posted 2016-07-18 Print this article Print

Company reports Q2 2016 revenue dropped 19 percent from a year earlier; net loss widens from $99 million last quarter to a whopping $440 million.

Yahoo, that early pioneer of Web search, email and Web services that has seen competitors such as Google, Amazon, Facebook and LinkedIn zip right by it for too long, is slipping slowly but surely under the waves.

While the company has been for sale for months, either in parts or as a whole, there doesn't yet seem to be a deep-pockets savior out there who wants to salvage it before it sinks. July 18 was set as yet another deadline for bids.

The Sunnyvale, Calif.-based company on July 18 did manage to beat Wall Street's rather modest expectations for revenue in the April-June quarter, but that's only a relative victory. After deducting commissions to its partners for paid business, Yahoo reported its Q2 2016 revenue dropped 19 percent from a year earlier, while its net loss widened to a whopping $440 million from $99 million last quarter.

Big Write-Down on Tumblr Properties

Overall revenue was $1.3 billion, up 5 percent year over year, which was in line with analysts' expectations. However, a $482 million write-down on its Tumblr blog network—a product that never succeeded for Yahoo after the company acquired it for $1.1 billion in May 2013—played into that total.

Yahoo already had lessened Tumblr's perceived value a while back by $230 million; these indicators show Tumblr's value has tumbled by 65 percent in three years.

CEO Marissa Mayer has been cutting spending and staff at the company during her entire four-year tenure, and the moves have not quelled the bottom-line slippage. Yahoo had about 11,000 employees when she came on board from Google in summer 2012; the company now employs about 8,800 people.

Mayer avoided talking about a possible sale on a conference call to analysts, investors and journalists. She did say the company is evaluating bids for individual divisions but added that the company would have no announcement that day.

Auction of Businesses Still On

Yahoo's board launched an auction of its core business in February after it put aside plans to spin off its stake in Chinese e-commerce giant Alibaba Group Holding Ltd. That $30 billion part of the Chinese retail giant was a deal engineered by co-founder Jerry Yang a decade ago and today serves as one of Yahoo's biggest assets.

The company also owns a major stake in independently traded Yahoo Japan. In total, the company's Asian assets total nearly $40 billion.

The first bids for Yahoo's core internet business were due April 11. The latest deadline was July 18; it's possible that some news of a sale may come soon.

Verizon Communications, the telecom company that owns AOL, has been seen by analysts as the leading contender. AT&T also is a potential buyer. Time Inc. dropped out of the process in April.

Buffett Perhaps in the Mix?

Said to also be in the running is a group led by Quicken Loans founder Dan Gilbert, who has the backing of billionaire investor Warren Buffett. Some private equity firms that specialize in buying troubled companies are also thought to be in the running.

Yahoo was forced to add a sale proponent, Jeffrey Smith of Starboard Value LLP, and three of his allies to its 11-member board. As a result, Yahoo's stock has climbed 14 percent so far this year, because investors are betting a deal will get done and that they will get a decent return from the sale.

Yahoo shares improved by 22 cents in after-hours trading July 18 after closing at $37.95.

Chris Preimesberger

Chris Preimesberger is Editor of Features and Analysis at eWEEK. Twitter: @editingwhiz


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