Yahoo Inc Let the Bidding Begin!

The search engine giant will be meeting with the activist hedge fund Starboard this week to settle important matters.

The last resort to save Yahoo! Inc. was to save it. The CEO, Marissa Mayer is been packaging a secret deal which is not so secret, to sell the core business of the search engine giant. However, Ms. Mayer has been offering this deal provided she remains the CEO of the company, as per a report by The New York Post.

As per the Post’s news, this deal has been pitched by Frank Quattrone, who is a banker hired by Ms. Mayer additionally they still have not disclosed how many people are interested to buy the core business of the search engine corporation but according to the news, over 40 parties had shown interest to buy the core business of the giant.

Furthermore, the board of directors are expected to meet with the activist hedge fund Starboard Value during the current week. This meeting comes as no surprise as both the parties have been having conversation back and forth. The hedge fund has been on Yahoo’s case for a while not to shake-up its management so that the company comes out of this black hole.

According to a recent letter sent by Starboard to Yahoo, it requested for the dismissal of Marissa Mayer and stated to include majority of Starboard people in the board of the company. It was not as much of a request as a threat as they further stated that if the demands of the hedge fund are not met, they might start a proxy battle.

New York Post states that this could be the last nail in the coffin to start a proxy battle by Starboard. In addition to that, the CEO of Starboard Jeffery Smith has clearly stated that the company needs to be sold now. Due to these reasons, the board is not pondering over whether to include two or more people from the hedge fund to Yahoo’s board.

The turmoil in the search engine giant started ever since Marissa Mayer was made the chief executive officer of the company; however she has taken drastic measures to turnaround the fate of the organization ever since her appointment in July 2012. Those measures have always caused much displeasure to the shareholders of the business.

The CEO as part of a revamp plan made public that she had decided to keep the $30 billion stake in Alibaba Group Holding Ltd but had decided to sell the core web business. Furthermore, the plan includes cost-cutting procedures as well which of course include cutting down the workforce. As per the plan, the company has planned to lay off as many as 1,600 employees by the end of the current year.

Yahoo To Cut 15% Of Workforce By The End Of 2016

Yahoo is working on a new strategic plan according to which it will cut 15% of its workforce and additionally close down five units.

Surprisingly, Yahoo! Inc. reported better than expected results for the fourth quarter of fiscal year 2015. During the after hour trading, the stock of the search engine company went down by 1% only. Despite of the fact that it reported better than expected financial results, it provided a poor guidance for the upcoming quarters, which results in the decline of the stock, but the chief executive officer of Yahoo, Marissa Mayer has a revival plan to bring the company back on track.

According to the earnings call, the company reported non-GAAP earnings per share of $0.13. The EPS was completely in line with the estimations of the analysts. However, analysts had predicted the technology giant to report revenue of $1.19 but it managed to beat the consensus of analysts and reported revenue of $1.27 billion for the latest quarter.

The revenue reported by the tech organization reflected a 2% year-over-year growth; additionally the EX-TAC revenue was seen at $1 billion, which indicated a 15% year-over-year decline. The company reported a net loss of $4.35 billion for the year 2015. A number of people stated that this net loss was mainly due to the $4.5 billion goodwill impairment charge. This means that the business paid more for the startup businesses that it acquired during the year. Revenue for 2015 stood at $4.96 billion, which reflected 8% year-over-year growth.

Since the past two years, revenue growth has been flat according to the collected Yahoo statistics. The traffic acquisition cost (TAC) is fairly increasing due to the deals that have been struck with Microsoft Corporation and Mozilla.

According to the guidance provided by the company for the year 2016, the full revenue is likely to be somewhere between $4.4 billion and $4.6 billion. This estimation by the organization is low in comparison to the estimations of analysts, as they are expecting revenue to be $4.78 billion for the year.

Yahoo! Inc. stated that in the first quarter of fiscal year 2016, the technology business is likely to report revenue of somewhere between $1.05 billion and $1.09 billion – which does not live up to the expectations of analysts yet again.

CEO Marissa Mayer said during the earnings call that the New Year will be a transition year for the organization in which the earnings and the revenue is likely to decline but will return to a normal to modest growth in 2017 and 2018. Additionally, she also suggested a new strategic plan that will transform it to bring better days.

As per the strategic plan, the company is expected to close down 5 units and probably cut down 15% of its workforce in the end of 2016 – this indicates that ever since 2012, the total workforce cut will be of 42%. With this cut in the workforce, the business will be able to maintain its focus on its profitable segments.