Yahoo’s Busy Earnings Call

Yahoo’s Busy Earnings Call


Chris Hill: Let’s move on to Yahoo. I had
said, on the podcast yesterday, that the first 78 questions during the conference call were
going to be about the sale of Yahoo. And we’ll get to that. But, anything stand out in terms
of the quarterly results, Matty? Matt Argersinger: Not really. Unfortunately,
more of the same. Revenue was down 11%, the search business continues to suffer as it
has for a long time. Paid clicks were down 21%. I was looking back, Marissa Mayer has
been at Yahoo almost four years. And if you look, back in 2012, Yahoo’s revenue that year
was just under $5 billion. Well, the revenue of the last 12 months? $4.8 billion. So, slightly
down in four years. And you think about all the changes, the moving parts, the acquisitions.
And to really not see any kind of revenue growth is pretty astounding. Still, I mean, this is a business that generates
a lot of cash, about $1 billion a year in operating cash flow, which is why, of course,
we’ll get to it, why there’s interest on the acquisition side. Still about a billion unique
visitors per month to Yahoo properties, which is impressive. And of course, you’ve got the
15% stake in Alibaba still, big position in Yahoo Japan. There is obviously value and
assets that people want. And it’s a business that’s still generating a lot of cash. Hill: Over and over on the conference call,
Marissa Mayer communicated a very clear message, which is, “We are taking this sale very seriously.”
And when you look at some of the operational moves that Yahoo has made in the last three
months, it absolutely looks like they’re walking the walk on this one. They’re shutting down
offices in different locations, they’re closing down different verticals that haven’t been
as strong as some of the other ones. Yesterday we talked a little bit about Yahoo Sports
and Yahoo Finance being among the stronger verticals. So, I think Verizon’s the lead horse.
Argersinger: I agree. Hill: What has Verizon done in terms of acquisitions
in the past? In term of how they go about them? Do they just write a big check? Is there
stock? I’m trying to think, in terms of Yahoo shareholders, or anyone who’s looking at this
thinking, “Well, wait a minute, if there is value there, maybe I should buy a couple shares
of Yahoo just because maybe they do get bought out at a premium.” Argersinger: Well, we can use the latest example
from Verizon, when they acquired AOL last year. Similar business to Yahoo. They paid
all cash, $4.4 billion. I think it was a $50 takeout price, so AOL shareholders got a nice
return. That business had kind of a Renaissance there for a few years, and they got a buyout
price from Verizon. Can’t really do that with Yahoo. I think Verizon is the clear leader.
If you look at why they did the AOL deal, it was really to expand mobile video advertising.
And they can do a lot of that with Yahoo, as well, but Yahoo, of course, has a $35 billion
price tag on it right now. There has to be some premium beyond that, given the number
of players we have in the acquisition hunt right now. And Verizon just doesn’t have the
balance sheet. They’re a huge company, but they’d have to
take on a lot of debt to do an all-cash deal in this case. So, I think they’ll probably
pay with some stock, if they’re going to do the Yahoo deal. Whether or not that is appealing
to Yahoo shareholders, I don’t know. I have to say, reading about the soap opera of this
acquisition, it reminds me a lot of Dell a few years ago. I just feel like Dell dragged
on. We knew it was either going to be taken private or acquired. And there were players
coming in and out of the deal, Carl Icahn got involved at some point, and eventually,
of course, it was taken private. I just wonder how long this is going to drag out, given
the number of interested parties and the diversity of what people want to do — acquire the whole
company, acquire assets of Yahoo. It’s going to be fun to watch … well, maybe not fun. Hill: And, Simon and I were talking earlier
this morning. I thought of a sports analogy, where one team is looking to trade for a star
player, and the opposing team says, “Okay, we’ll trade our star player, but you have
to take these three other players, too, who aren’t as good, and they have bad contracts.” Argersinger: “Take those contracts, give us
some cash.” (laughs) Hill: And that’s the thing. I’m sure, if you’re
Verizon, you’re looking at Yahoo and you’re just thinking, “Can we just take these segments?”
It makes sense to me that Verizon is looking to add content to their pipes. So, looking
at Yahoo Sports, looking at Finance, looking at some of the other verticals. But, if I’m Yahoo,
(laughs) I’m not just selling Yahoo Sports. Argersinger: No. I think your earlier point
was good. Say what you will about Marissa Mayer, if she leaves this year, which is most
likely, after the acquisition, shareholders, since she came in, have actually done pretty
well. I think Yahoo has probably about a double in stock since she came in. It’s kind of under-performed
the market recently, but I think she’s done a good job. She certainly has a shareholder
mindset. So, I think she has positioned the company, as you said, for a full sale of the
company. And she wants the highest price she can get for shareholders, obviously. Why wouldn’t
she? She has a lot of shares herself. Simon Erickson: Yeah. And the point like you
were making, Chris, everybody is competing for our time these days. You can only check
so many apps or go on so many websites every single day. Yahoo and Marissa Mayer had the
right strategy all along. “Hey, we want to be a part of your habits on a daily basis,
and we’re going to build the products around those.” I just think Yahoo was in a difficult
position because they were so far behind that transition to mobile, where everyone was checking
apps on their phone. Now, I do check Fantasy Football quite a bit during the season, I
will admit. But I just don’t think Yahoo was as established as they wanted to be in your
daily habits.

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