Michael Liedtke San Francisco
YAHOO chief executive Marissa Mayer is losing a precious security blanket now that she is spinning off the internet company’s prized stake in China’s Alibaba Group.
The breakup announced on Tuesday will transfer ownership of 384 million shares of Alibaba stock, currently worth $39 billion (R449bn), into a new entity called SpinCo. Those holdings, part of an astute investment made almost a decade ago, represent the main reason that Yahoo’s stock has more than tripled since Mayer became chief executive two-and-half years ago.
Investors viewed Yahoo as another way to own a piece of Alibaba, a rapidly growing e-commerce company that is expected to become more successful during the next decade as more of China’s population gains online access through smartphones and other devices.
As long as there was a link to Alibaba, it almost did not matter that Yahoo’s digital services have been struggling to generate more revenue during the past six years, even as advertisers have been pouring more money into digital marketing.
With the Alibaba stake jettisoned by the end of the year, Mayer will be under greater pressure to prove she can rejuvenate one of the internet’s oldest and best-known firms.
“The heat is on,” Outsell analyst Randy Giusto said. “This (spin-off) exposes the fact that Yahoo still is not growing in key areas where it has been investing.”
Fresh evidence of the challenges facing Mayer emerged on Tuesday with the release of Yahoo’s fourth-quarter results. Earnings fell 52 percent from last year, while Yahoo’s revenue dipped 1 percent.
It marks the eighth time in Mayer’s 10 quarters as Yahoo’s chief executive that the company’s revenue has declined from the previous year.
Yahoo’s problems largely stem from its inability to adapt to the declining use of banner ads as more people spent their free time gazing into the smaller screens of smartphones and tablets instead of desktop and laptop computers. Analysts credit Mayer for overhauling Yahoo’s mobile apps and sharpening the focus on smartphones and tablets, but it still has not been enough.
After subtracting commissions, Yahoo’s display ad revenue declined by 5 percent from the previous year in the fourth quarter. Advertising tied to internet search results – a bright spot in recent quarters – barely budged from the previous year at $462 million.
The fourth quarter included the start of a deal that makes Yahoo the default search engine on Firefox’s web browser in the US until late 2019. Yahoo replaced Google on Firefox, and Mayer said on Tuesday that she hopes to do it again by persuading Apple to switch to Yahoo’s search engine. – Sapa-AP