Yahoo is a victim of the new phase of the Internet that is laced with buzzwords like “mobile” and “location-aware.” When was the last time you pulled out your smartphone and started Yahoo-ing for travel times to work? Yahoo’s market share in searches has steadily declined and plateaued, as it has been overrun by rivals like Google in search engines, Tinder in dating, and Snapchat for messaging. Yahoo has been burning through CEOs almost as fast as its market capitalization has been falling. The company is essentially trying to liquidate itself, with shareholders and the board hoping the sum of the parts is worth more than the whole.
Yahoo holds a sizable stake in Alibaba and it initially contemplated selling that $30 billion stake, but eventually decided against it, another blunder since Alibaba has been down since then (Yahoo has a knack for such snafus). In mid-June of 2016, Yahoo is now holding an auction for some 3,000 patents and its entire core business. Currently, AT&T and Dan Gilbert, founder of Quicken, are known to each have bids around $5 billion, and the highest bid is rumoured to be almost $7 billion. Verizon has also made a bid of around $4 billion. This is just for its core business; its current market cap is around $35 billion.
Why are telecom companies so interested in Yahoo? There is a long term shift of power occurring from content providers to content creators. Telecom companies realize that they need to gain some market share in these areas, and Yahoo is a good deal. Bidding is currently in the second round, and Yahoo has yet to decide who will be bidding in the final round. Because of this uncertainty, there have been wild fluctuations in shares of YHOO, with a 20% gap up then down after hours. It remains to be seen who will buy Yahoo, and put to rest the internet icon of the early 2000s.
– Michael Trehan