Huge Pressure and Management Change at Yahoo! Inc. (YHOO) The Edge Predicts Future M&A

Strategic Initiatives in The Current Scenario Looks Unlikely But Replacing the Current CEO Might Provide Some Assurance to Investors

Knowing the activist movements and the opportunities, The Edge believes that the Spinoff of other businesses of Yahoo (YHOO) would give rise to similar tax concerns as in the case of the proposed Alibaba Spinoff, thereby making less sense for spinning of the businesses. On the other hand, we believe that getting a buyer for the internet business or for its stake in Alibaba’s business or entire YHOO would be tedious considering there’s a lot of moving parts associated with the company as well as poor performance of the core internet business of the firm. Further, a sale of businesses would also result in tax liability for the company. We believe that Marissa Mayer, ‘the current CEO’ of YHOO has lagged to deliver shareholder returns due to lack of proper strategies. After spending nearly one-year on structuring the Alibaba Spinoff, the plan was finally scrapped due to the potential huge tax bills resulting in huge selling pressure in the stock. Unfortunately, Mayer hasn’t been successful in reviving the core internet business and also undertook acquisitions, which were not perceived of much value by shareholders and the street alike.

We believe that the CEO has failed to implement right strategies over her tenure the past few years, which has resulted in low investor confidence, thereby creating selling pressure in the stock. Hence, we think that at this point of time, rather than evaluating the strategic options; the management and shareholders of Yahoo should concentrate on bringing a new freshly competent, but proven CEO who could first focus on revamping the core internet business, thereby generating interest among potential bidders that we have analyzed.

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