Yahoo board to weigh potential sale of Internet business

Internet giant Yahoo will consider selling all or part of its core business, according to a report in the Wall Street Journal.

A few private equity firms will likely be amongst those looking at the core business of Yahoo, said those familiar with the situation.

Yahoo is planning to spin off its $30 billion stake in Chinese e-commerce bazaar Alibaba Group into a separate company called Aabaco either next month or in January. Yahoo was once one of the most powerful websites on the Internet, but it has been overtaken in email and search by Google and beaten in Media by Netflix (NFLX) and Amazon (AMZN). “Yahoo is the only Silicon Valley company we know that now has a stock price nearly entirely driven by the value of an entity outside of its control”, the letter reads. Those companies make up the majority of Yahoo’s $31 billion market capitalization, WSJ said, while its core business is worth just $3.9 billion. Yahoo has seen a decline in sales of its desktop display advertising and has been eclipsed by younger competitors like Facebook Inc. and Google Inc.

Activist investor Starboard Value asked Yahoo in November to drop plans to spin off its stake in Alibaba due to the tax concerns. But less than half of its market cap is attributable to Yahoo’s own business, according to a Thomson Reuters Breakingviews calculator. The board will weigh all its options, and it is unclear whether the directors will change course, said the people, who spoke on the condition of anonymity because they were not authorized to publicly discuss the plans. If things continue to deteriorate at Yahoo and more shareholders clamor for a new CEO, it doesn’t take much imagination to envision Mayer deciding to step down to spend more time with her children at some point next year.

“I think the issue for the investors and Wall Street is growth”, said Greg Sterling of Search Engine Land.

Yahoo has said it wants to proceed with the deal anyway, and close it this month. Companies expected to explore a purchase if Yahoo decides to sell include Verizon Communications Inc. and Barry Diller’s IAC/InterActive Corp., people familiar with the matter say.

Chances are high Yahoo might end up holding on to its core business. 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.