Yahoo mulls sale of core Internet business

Yahoo’s stock price spiked Wednesday morning, after reports surfaced that the tech giant’s board of directors may be preparing to sell the company’s core Internet business.

The boardroom intrigue revolves around a recent proposal from Starboard Value, a NY hedge fund that been pressuring Yahoo CEO Marissa Mayer to take dramatic steps to boost the company’s stock. Yahoo’s market value roughly mirrors the value of these investments, meaning Wall Street essentially views its core business as worthless.

Yahoo’s core business has not been very strong, despite a turnaround effort by Mayer, including a search advertising agreement with rival Google announced in October.

According to news reports, Yahoo’s board is meeting this week to talk about selling off some of its core assets.

Yahoo had previously planned to spin off its shares in Alibaba Holding Group, through a company called Aabaco Holdings, but has held back on the move because of uncertainties about potential tax implications. With Mayer as CEO, Yahoo bought Tumblr and a number of other, lesser-known companies and worked on improving its mobile apps, but it is still struggling to grow the business. Among them are Verizon Communications and IAC/Interactive Corp. Private equity firm TPG Capital is also reportedly considering buying some of the business that Yahoo may seek to offload.

Naturally, Yahoo isn’t commenting on any of this.

Yahoo shareholders could end up paying billions in taxes if the U.S. Internal Revenue Service deems a spin-off taxable.

Yahoo’s search business: Yahoo handed off much of its search technology to Microsoft when the two struck a partnership in 2010. Shareholders seem to care a whole lot more about the company’s stakes in Yahoo Japan and Alibaba.Mavens revenue in the third quarter jumped 43 percent year over year to $422 million, and Yahoo’s overall revenue climbed to $1.23 billion.

The November letter from Starboard referred to “numerous conversations and meetings” held privately with Yahoo in the past year, and the activists’ growing frustration with the company’s reluctance to adapt its plans as Yahoo’s shares – and Alibaba’s – have declined. Its shares are up about 5 percent to $35.40 amid all the hoopla. Rob Barrett, who led media strategy, also departed, Re/code website reported last month.

Yahoo’s stake in Yahoo Japan is worth $8.5 billion and its 15 percent stake in Alibaba is worth about $32 billion.