Yahoo's Alibaba spinoff plan
January 28, 2015
Yahoo Chief Executive Marissa Mayer on Tuesday unveiled a plan to split off the company's 40-percent stake in Alibaba into a new company called SpinCo.
In a conference call Mayer told investors the deal "maximizes value for shareholders," and would avoid a potential tax bill of up to $16 billion under a traditional sale of the stake.
Mayer also said the move is part of a broader effort to help Yahoo's "remixing" of its activities around mobile Internet, video and other forms of online media.
Welcome news
Shares in Yahoo jumped almost 7 percent to $51.2 in after-hours trading on Tuesday as investors cheered the plan.
SpinCo will own all of Yahoo's 384 million Alibaba shares, estimated to be worth about $40 billion, and the new company's stocks will be distributed to Yahoo shareholders. The transaction is scheduled to take place in the fourth quarter this year to meet a one-year holding requirement imposed in Alibaba's initial public offering (IPO) in September 2014.
In 2005, Yahoo was an early investor in Alibaba, acquiring a 40-percent stake for about $1billion (it shed half its stake in 2012). Nine years later, Alibaba's IPO, at around $22 billion, was the largest in US history - and by the end of its first day on the New York Stock Exchange the company was valued at over $230 billion.
Trying times ahead
Yahoo's Alibaba stake is seen as one of the main reasons why the stock has more than tripled since Marissa Mayer became CEO about two and a half years ago. Yahoo's current market value stands at $45 billion.
However, Yahoo's core business is struggling to generate more revenue, even as advertisers have pouring more money into its digital services.
Also on Tuesday, the company announced that its fourth-quarter profit fell 52 percent from a year ago to $166 million while revenue was essentially flat at $1.25 billion.
Nevertheless, CEO Mayer said the result was showing "stability in our core business," as revenue from users accessing the company's sites on mobile devices rose some 23 percent in the quarter to $254 million.
The fourth quarter included the start of a deal that makes Yahoo the default search engine on Firefox's Web browser in the United States until late 2019. Yahoo replaced Google on Firefox, and Mayer said she hoped to do it again by persuading Apple to switch to Yahoo's search engine on its Safari browser for the iPhone and iPad.
"We are all here to return an iconic company to greatness," Mayer added, unveiling her vision for the company.
uhe/sgb (Reuters, AP, AFP, dpa)