Sunday, May 13, 2012

Past time to liquidate Yahoo

After turning down Microsoft’s $31/share purchase offer four years ago, Yahoo shares quickly gave up 25% of their value. Since the post-crash recovery began three years ago, the NASDAQ index is up 80% while YHOO has gone exactly sideways at $15. (Another well-down Silicon Valley search company is up 55% during the same period, while a large Redmond-based software company is up 60%.)

Today Yahoo forced out their controversial CEO Scott Thompson, agreed to put 3 (of 4) of Daniel Loeb’s dissident director nominees
on the board, and appointed a new interim CEO, Ross Levinshohn.

The only thing that seems to be supporting the stock are its 33% stake in Yahoo Japan and 40% stake in Chinese search company Alibaba. Thompson was apparently working on selling these stakes to raise money.

So far in the past 5 years, the company has had a string of mediocre, inadequate or just plain terrible CEOs: Terry Semel, Jerry Yang (who turned down Microsoft), Carol Bartz, interim Tim Morse, Scott Thompson and now interim Ross Levinshohn.

Loeb has been proven correct in his criticisms of Yahoo. And due the mistake in hiring Thompson without checking his resume, Loeb he has succeeded in getting the board seats where Carl Icahn failed.

Yahoo is now worth 7% of Microsoft and 9% of Google, and the trend of the past five years has been layoffs rather than growth. Its days as a stand-alone company are long since over. The company should be wound down for the best possible price, but since Bartz sold the company’s birthright to Microsoft, it seems unlikely to be able to start a bidding war for all but its most marginal properties.

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