Yahoo reportedly considers sale of core Internet business

Yahoo’s board will meet to discuss whether it should sell its core business instead of its Alibaba stake, according to a report Tuesday in The Wall Street Journal.

The board is expecting to discuss options in sessions that start on Wednesday and will continue through the end of the week, according to those familiar with the company.

In more than three years at the helm, Ms Mayer has made little progress turning around the company, whose revenue is forecast to drop 8 per cent this year. And Recode’s Kara Swisher downplays the original WSJ report and writes that the Yahoo board is actually going to be backing the embattled Mayer and focusing on the company’s planned Alibaba spinoff.

Yahoo is considering selling off its traditional web business as an alternative to spinning off its $33 billion stake in Chinese e-commerce group Alibaba, the sale of which could land Yahoo with a $10 billion tax bill.

Reports of the possible sale was received favorably, with stock rising 7 percent in extended trading. That would leave it with the Alibaba stake and Yahoo Japan, which is a joint venture with SoftBank Group of Japan. A number of hedge funds are rumoured to be in line or thinking of buying the core Yahoo business. This shows that the Internet business is underperforming the Street. The company’s stake in Yahoo Japan is held at a 30 percent discount off its actual market value, while its Alibaba stake is held at about a 59 percent discount.

But Yahoo has $5.9 billion in cash and short-term investments on its balance sheet, as well as $1.6 billion in property and equipment (although it’s also carrying $1.2 billion in debt from convertible notes).

Cowen’s John Blackledge pegs the value of Yahoo’s search and display advertising business at $3.84 billion.

But people at two potential bidders told Business Insider on Wednesday that they are not exploring any kind of deal to acquire Yahoo’s internet business at this time.

The prospect of the Internal Revenue Service taxing the Alibaba transaction also has weighed on the stock.

We caught up with Greg Sterling, vice president of strategy and insight at the Local Search Association, to ask about the Yahoo sell-off rumors. Such an amount of traffic is what many media and telecommunication companies are yearning for, seen as a ideal audience for advertising purposes.