Yahoo! Inc (YHOO) Verdict Depends completely on Alibaba IPO


Yahoo! Inc. (NASDAQ:YHOO) reported a weak quarterly earnings for the Q2. Their revenue dropped by 4% in Q2 to $1.08 billion from the year-ago quarter. This is the lowest reported revenue growth since Marissa Mayer took over the company. With Alibaba set to go public next month, investors feel that this might pump some cash into Yahoo. David Kirkpatrick, the CEO of Techonomy Media Inc. talked on Bloomberg on Yahoo’s current status and what could Alibaba do to them. In another Bloomberg Show, Eileen Burbidge, Partner at Passion Capital talked on Yahoo’s decision to retain major Alibaba Shares at IPO and its impact on the company.

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Many people feel that Yahoo! Inc. (NASDAQ:YHOO) is not doing very well for almost a decade. Kirkpatrick thinks that it is a company which is trying to find its way back up and they are in transition phase for a long time now.

“Number of people say, Marissa might not be doing the greatest job, but who can do a better job. Who could save this company? On the other had are they really trying to become a media company?” he said.

He doubts if Yahoo! Inc. (NASDAQ:YHOO) is actually trying to turn into a media company with the deal to live broadcast of concerts and journalism, etc. He thinks that the company is doing a decent job at it. He feels the biggest problem to company is the fact that banner ads and other kinds of ads which was core business for them at their peak is getting diminished.

Kirkpatrick thinks that there is a very remote possibility that Alibaba can even acquire Yahoo! Inc. (NASDAQ:YHOO). He feels that Alibaba has bigger ambitions and they have displayed it through their channels, soccer team sponsorship, etc. He thinks that Alibaba would strive one day to be a global company and may use Yahoo to do that.

Yahoo! Inc. (NASDAQ:YHOO) 44% revenues comes from display ads and 34% from search ads. Kirkpatrick thinks that the traditional ad display model of the company is broken down since they are not innovating enough in that model to stay in competition.

Mayer had managed to keep nearly 75% of Alibaba shares after the IPO. Burbidge thinks that it is stoke of genius from Mayer. Mayer has negotiated over the past few weeks and got down the Alibaba shares at IPO from 40% to 27% which Burbidge thinks is really amazing for the company. She thinks that holding on to majority of Alibaba stock is keeping the Yahoo stock up.

She thinks that people are still holding onto Yahoo stock with the hope that Alibaba IPO would pump in a lot into the company. She pointed out that Microsoft Corporation (NASDAQ:MSFT) had surpassed Yahoo in revenues from ads which is a shocking news for Yahoo.

Premium ads are not going to Yahoo! Inc. (NASDAQ:YHOO) which Burbidge thinks is a serious problem to the company. She said that reclaiming more of Alibaba shares is again critical because core ad business is not doing very well for them. She feels that Mayer is trying to buy some time through this and get a turnaround in some way.