Alibaba unlikely to be interested in Yahoo’s core business

Combined, that’s far more than the $34 billion value that Yahoo shareholders are now placing on the entire company, even after a almost 6 percent jump in its stock price Wednesday to $35.65 a share.

Shares of Yahoo gained more than 5 percent on Wednesday after news reports surfaced that the company’s board of directors are convening to discuss a potential sale of its troubled core Internet business.

Under Ms. Mayer, Yahoo has made investments in online video, advertising technology and mobile software that have failed to create meaningful traction for the company. In her 3 1/2 years as Yahoo’s chief executive, Mayer has yet to introduce any products that have dazzled Internet users, investors, business partners or employees. Prominent activist investor Starboard Value has pressured Yahoo to sell its search and display advertising businesses instead of spinning off its Alibaba holdings. Ten Years ago, Yahoo was able to acquire around 40 percent ownership of Alibaba for $1 billion.

While Yahoo’s share price has more than doubled and widely outperformed the broader stock market since Mayer took over as president and CEO in July 2012, much of the long upward trajectory was funded by an aggressive share buyback program and its stakes in Alibaba and Yahoo Japan (4689.T).

The Wall Street Journal adds that the Yahoo’s board are under increased pressure due to the lack of progress in turning around the company from CEO Marissa Mayer’s plans, which is in its fourth year, and the exodus of top executives. In over three years of her career as the Yahoo! Inc. Mail and search. But those efforts have largely failed to Yahoo’s image of a dog that’s had its day, and now Mayer could be about to do something much more drastic and sell off its Internet services altogether.

In September, Yahoo’s plans for the spinoff of its stake in Alibaba hit a roadblock when the U.S. Internal Revenue Service denied a request to bless the transaction as a tax-free deal. He declined to comment on the company’s potential interest in Yahoo assets.

As mentioned, Yahoo’s core business is now valued at $0 after factoring out YHOO’s other holdings in BABA and Yahoo! Some Wall Street analysts see it worth considerably less – but still more than zero.

“This is an undervalued company if you do a sum of the parts sort of thing, it doesn’t take a whole lot of imagination to see what could be coming”, said Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh. Now, 20 years after its founding, Yahoo, which still has a billion people using its apps and websites, is an afterthought in many ad budgets. While the board has yet to decide whether it will seek a buyer, a host of companies are expected to be interested should Yahoo directors choose that path. What would draw buyers, analysts and investors say, is primarily the company’s huge Internet audience and the billions of ad dollars they still draw.