Split Up Yahoo?
Fred Wilson’s a sharp guy and his Yahoo plan is basically to outsource search to Google and dismantle the place into Yahoo’s many valuable components like the stake in Alibaba. I’m intrigued by this creative proposal though I can’t see Yahoo doing many of these things.
Probably the big unknown in the big Microsoft+Yahoo equation is whether Yahoo will be willing to concede the search battle and use Google search and Google monetization. In the short term this would bring more profit to Yahoo, but long term effects are not clear since they’d be effectively a prisoner to Google who would control a key function of Yahoo’s business. However Yang and the Yahoo board would likely see this as a superior situation to ownership by Microsoft. Google’s stock has been dropping severely but they could still sweeten the pot with other helps, so I’ll be watching for better offers from Microsoft and counters from Google in the coming weeks.
disclosure: long on Yahoo
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Frankly I don’t know how to value the individual parts much less value their sum. Much depends on management’s views and management’s emphasis.
Yahoo has been falling short and when others have not been falling short, it seems to be a management failure. I don’t know if throwing in the towel on search is the right thing to do. It would seem to be unwise.
Perhaps the fundamental problem is not how to value the separate functions but how to view them and prioritize them.
Search, portal, content creator, content aggregator, … what?
FG valuation stuff is a part of the game I’ve never understood well, and skepticism is always called for if somebody suggests things are worth more than they are selling for.
It’s not at all a clear, mathematical, clean thing. Some investment theory says a company should be valued on it’s long term dividend potential, but companies like Microsoft have maintained huge value long term without distributions – instead they reinvest profits and in theory boost their value in that fashion, which investors obtain when they sell out.