After taxes, Yahoo figures to make about $6 billion from selling shares in the IPO. Yahoo promised to return half of its IPO proceeds to shareholders, so Quartz predicts that CEO Marissa Mayer will be left with $3 billion to invest — in addition to the $4 billion in cash on Yahoo’s balance sheet.
So what will she do with this sizable chunk of change? Mixing levity with a touch of seriousness, Quartz makes a few irreverent guesses:
Earlier this year there had been much talk about this deal happening. However, two months ago, Yahoo “flat-out denied” any interest in this possible acquisition. There was renewed rumors about a deal on Friday. But what would Yahoo gain? It “is still the second-biggest digital property in the U.S.” and doesn’t have a problem making money from web traffic. “It’s not clear how buying AOL, the owner of the Huffington Post and a bunch of other websites, would change that,” notes Quartz.
Like AOL, there was buzz earlier this year that Yahoo might buy Yelp, the popular consumer reviews site. Instead, the company inked a strategic partnership with Yelp. Because of this union, there’s now no reason for Yahoo to seriously consider this transaction. Besides, with Yelp valued at about $5.5 billion by the stock market, Yahoo probably couldn’t afford it.
Hire More Name Talent and Buy Programming
Quartz notes that under Mayer Yahoo has been pouring a great deal of money into video. And despite its “huge overall traffic,” the company still trails behind Google when it comes to video traffic and advertising.
But Yahoo is making attempts to change that. Recently, it hired TV news anchor and former talk show host Katie Couric to launch a new live news channel. Further, the company has forged deals with concert promoter Live Nation and music superstar Taylor Swift to stream live concerts online. It is also trying to get into Netflix territory by ordering a lineup of original comedies, which Quartz says “sound quite promising.”
Continue the Acqui-hire Binge
Since Mayer has assumed the helm at Yahoo, the company has acquired about 40 companies, says Quartz. The only one that was “significant” in terms of shareholder value was the $1.1 billion buy of blogging platform Tumblr. Most of the other acquisitions, says the business news site, “have been acqui-hires of engineers and product managers, acquisitions Yahoo thinks have helped solve its talent problem.”
Yahoo could do more of this, speculates Quartz “but it would take a long time to burn through all of its money by sticking to small deals like these.” It wouldn’t necessarily raise revenue either.
With revenue declining for 13 of the past 16 quarters, “Yahoo’s core business is shrinking,” says Quartz. Still, its stock share price is up about 170% since Mayer has taken over. But, as the site points out, “that’s mainly due to its stake in Alibaba.”
Although Yahoo will retain a 16% stake in the Chinese e-commerce giant, “if an investor wants exposure to the Alibaba story, there is no need to bother with Yahoo anymore, it can just simply buy shares of Alibaba,” Quartz says.
Yahoo’s shares were down 2.8% from Thursday’s close as of 3:05 p.m.
Photo: Wikimedia Commons, Mrgadget3000, CC-BY-SA-2.0-DE