Yahoo May Be Preparing to Pare Down for Potential Buyers

NEWS ANALYSIS: If Yahoo is carved up, assets sold separately could solve the short-term income problems, but Yahoo wouldn't be Yahoo minus those key divisions.

Potential Yahoo buyers

As Yahoo's annual board of directors meeting continued Dec. 3, reports of potential buyers for parts of the under-performing Web services and advertising media giant are cropping up all over the place. Yahoo plans to reorganize could emerge after the board completes its deliberations on Dec. 4.

Among the stories were messages to the effect of "Yahoo May Sell Internet Businesses" and "Yahoo May Have Buyers for Core Internet Assets."

My response to that is this: What is Yahoo if not an Internet business? Wouldn't selling its core Internet businesses amount to selling the company itself? Yes, the Sunnyvale, Calif.-based media company could peel off and sell some of its assets, such as its $30 billion stake in China super-retailer site Alibaba, the under-performing Tumblr blog site, its Flickr photo storage site, or even its Yahoo Mail function, but those aren't core functions.

Which Divisions Might Be Sold?

With consumer email clearly on the wane in favor of messaging and photos being stored in OneDrive, Google Drive, Dropbox, iCloud and other personal-cloud storage locations, the loss of those franchises probably wouldn't impact the core Yahoo site business as much as the potential loss of its news, sports and financial sections. It's hard to see Yahoo continuing as Yahoo without the news content divisions.

On the face of it, Yahoo doesn't appear to be in that desperate a situation. The company is in the black and has been for a long while. Its home page serves more people on laptops and desktops than any other in the world. It has worldwide brand recognition. More than 200 million visitors land on its pages every month. It has a brilliant administrator, Marissa Mayer, running day-to-day ops as CEO. It has Katie Couric fronting the news operation. Those things are golden.

Financials Still Okay, but Long-term Outlook is Shaky

In the company's most recent quarterly earnings report, Yahoo showed a profit of $76.3 million for the third fiscal quarter ended Sept. 30. Black ink is never bad, but on overall revenue of $1 billion, the margins are thin and getting thinner.

Yahoo doesn't have as many cash-flow positive divisions as Google does with its search engine, Web advertising, collaboration tools and enterprise tools franchises. It doesn't cater as much to the development world, either, compared to Facebook and Google. This all adds up in the eyes of investors.

The Wall Street Journal reported Dec. 3 that several potential suitors, including Verizon, Barry Diller's IAC/Interactive, News Corp., Time Inc. and private-equity firm TPG, may look at all or part of the core business. There are undoubtedly others in lurking mode.

If Yahoo is carved up, individual assets sold separately could solve the short-term income problems, but Yahoo wouldn't be Yahoo minus some of those key divisions.

The company's main problem is two-fold: It lost the search engine battle 15 years ago to Google, and desktop display advertising simply isn't what it used to be—across the IT world, not just for Yahoo. Yahoo also hasn't shown an identifiable mobile ad strategy, one that would really lead the charge for a turnaround the way Facebook's did in 2012.

Whatever the board decides to do this week will be news—whether they act on anything or not.

Yahoo Refreshes Messenger for Group Chats

Yahoo on Dec. 3 refreshed its Messenger app, which lets users send hundreds of photos at once by bundling feature content from Flickr and Tumblr.

The new version enables group chats and lets users store hundreds of photos at once in the cloud instead of any one person's phone—although images can also be downloaded to mobile devices in full quality.

The app provides social network-type features, such as allowing users to unsend messages and images and like/comment on posts.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...