Four years have passed since Marissa Mayer took over as Chief Executive of Yahoo. And through all of it, the world watched and wondered whether the ex-Googler could succeed in resuscitating the struggling internet giant from its slow decline. Now with a number of bold bets that haven’t paid off and reorganizations that did little to reduce costs, it looks like we’re getting the unfortunate answer we once hoped wouldn’t need to come.
On Monday the 18th, Yahoo closed its third and final round of bidding in the auction of its core business. But the salient process received scant mention during the company’s Q2 earnings call held the same day. During a presentation largely expected to show a weak quarterly performance, Mayer noted the company is “deep into the process of evaluating proposals and alternatives, and will update our shareholders as soon as is prudent.”
Some of the major bidders include AT&T, several private equity firms, and a Quicken Loans co-founder, Dan Gilbert. But the rumored front-runner is Verizon Communications, which already bought out AOL a year ago as it expands into mobile video and online advertising.
Analysts estimate the sale could go for as much as $6 billion in a sale including the company’s land and patents. Meanwhile, former Yahoo interim CEO Ross Levinsohn told CNBC he expects the company to trade for a more conservative $3.5 billion to $4 billion range.
A look at Yahoo’s latest earnings results give some indications toward a potentially lower price.
Yahoo reported $1.3 billion in revenue in the three months ending on June 30, up from $65 million a year earlier. But this wasn’t enough to avoid a net loss of $440 million, up from last year’s net loss of $22.0 million. They also lost an additional $8 million from operations and missed analyst expectations in adjusted earnings with $0.09 per share compared to the expected $0.10 per share.
Yahoo also wrote down Tumblr’s value for the second time this year. Analysts thought the $1.1 billion price tag was too lofty a valuation at the time Yahoo made the acquisition in 2013. Last quarter, Yahoo lowered Tumblr’s value by $230 million and then lowered it by another $482 million this time around.
BGC analyst Colin Gillis said in a research note that Yahoo’s core assets would be sold for relatively little. “We expect any offer in the range of $5-plus billion should be accepted by the Yahoo board to bring the process to a close,” he said.
And like the final swing of an executioner’s ax, he added, “Yahoo is over in our eyes.”
