Yahoo has opened the door to a potential sale of its core internet business as it seeks to return to profit. This would be welcome news to Verizon Communications, which is among suitors to have already expressed interest.
Yahoo (NASDAQ:YHOO) has opened the door to a potential sale of its core internet business as it seeks to return to profit. This would be welcome news to Verizon Communications (NYSE:VZ), which is among suitors to have already expressed interest.
The Sunnyvale, California-based technology company has unveiled its latest turnaround plan, aimed at simplifying the company, narrowing its focus and increasing efficiency. It yesterday announced a net loss of US$4.35bn for FY 2015.
Yahoo chairman Maynard Webb said that while the board is committed to the management team’s turnaround efforts, it also “believes that exploring strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders”.
Webb said that separating the company’s stake in Chinese internet retailer Alibaba from the operating business remains a primary focus, but the board will also “engage on qualified strategic proposals”.
Meanwhile, Bloomberg cited Yahoo CEO Marissa Mayer saying: “We’re right at the beginning of what the board wants to do. It has yet to be seen exactly what types of interest will really transpire, but we’re open to any transactions.”
Yahoo has come under fire from activist investors such as Starboard Value as its performance has worsened and stock depreciated. Starboard has called upon the company to sell its core internet and search business, which is struggling to compete with the likes of Google.
Last December, Verizon CFO Fran Shammo (pictured) said the company would look at Yahoo’s core internet business under the right circumstances.
At the time, he said it was “way too premature” to talk about a potential purchase since Yahoo’s board and investors hadn’t decided what to do with the asset, but added that “we will look at everything across the spectrum and if we see there is a strategic fit and it makes sense for our shareholders and we can return value, we will look at it.”
Verizon made big bets on content last year, paying US$4.4bn for AOL over the summer and launching its ad-funded mobile video streaming service Go90 in October. It also bought mobile ad and app monetisation provider Millennial Media for US$238m to further bolster its capabilities in wireless advertising.
Private equity firms Bain Capital Partners and TPG are also considering bids for Yahoo, Bloomberg cited people with knowledge of the matter saying.
Yahoo said it turnaround strategy will see it reduce its product portfolio to core offerings, consolidating some of its digital magazines under one of four core verticals and closing others down. It will also exit products such as games and Smart TV and explore the divestment of non-strategic assets including certain patents and real estate. The company will also cut its workforce by about 15% and shut offices in Dubai, Mexico City, Buenos Aires, Madrid and Milan.
