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Shakeout in the Yahoo bid process narrows players

USA TODAY USA TODAY 19/04/2016 Mike Snider

The bidding process for Yahoo's Web assets has shaken out some interested parties, leaving Verizon as one of the frontrunners and making the value of its patent portfolio a wildcard in the complicated, multi-player process of breaking up Yahoo.

As ever with Yahoo's next steps, there could still be surprises in store. On Monday YP Holdings, the digital successor to the Yellow Pages, emerged as a bidder, according to Bloomberg. The company, which has 70 million users monthly, is submitting a merger proposal as part of Yahoo's first-round bid process, which ends Monday.  YP declined comment on the report.

Meanwhile, many of the expected dozens of companies thought to be potential bidders have fallen by the wayside with AT&T, Comcast, Alphabet, the parent company of Google, and IAC/Interactive, the Web media company chaired by Barry Diller, excusing themselves from the process, according to The Wall Street Journal, which cited persons familiar with the situation.

Alibaba and Time Inc., didn’t bid, according to two people not authorized to speak on behalf of each company. Yahoo declined comment, as did AT&T and Microsoft, while others did not respond to inquiries from USA TODAY.  Yahoo shares were flat at $36.52 on Monday.

The bidding process has been complicated by Yahoo's (YHOO) apparent reluctance to share key financial data beyond this year. The company has offered dreary business projections for just 2016.

Verizon, which also declined comment on the bidding process, had publicly announced interest in the troubled Web conglomerate even before the official bidding process began. Yahoo's advertising technology and its content such as Yahoo Finance and Yahoo Sports could mesh well with Verizon, which is ramping up its mobile video service, analysts say.


The bids come as Yahoo bows to shareholder pressure to engage with prospective buyers for its core assets. Despite acquisitions and a strategic overhaul by CEO Marissa Mayer, Yahoo sales are sinking and its market share is losing ground. It reports earnings after the bell Tuesday. Analysts polled by S&P Global Market Intelligence expect revenue of $845.9 million and adjusted earnings per share of 7 cents, significantly shy of the $1.04 billion and 15 cents reported in the same quarter a year ago.

Yahoo's fragile financial state has prompted a sell-off of its assets — only partially reversed in the last two months — amid mounting doubts over Mayer's stewardship since she took over as CEO in July 2012. Although Yahoo has maintained a large audience upwards of 1 billion online, eMarketer predicts Yahoo's worldwide ad revenue will plunge 14% this year, to $2.83 billion as it continues to lose market share to Google and Facebook.

Exterior view of Yahoo headquarters in Sunnyvale, Calif.© Marcio Jose Sanchez, AP Exterior view of Yahoo headquarters in Sunnyvale, Calif.


Yahoo's technology patents could truly interest Verizon, says Eric Jackson, managing director of investment firm SpringOwl, which is a Yahoo shareholder and has acted as an activist to push Yahoo to change its management and reduce headcount.

Yahoo has a technology patent portfolio "that is really valuable in particular to certain bidders and probably is most value to a Verizon," said Jackson. He expects the bids, which closed Monday, to go into a second round. 

SunTrust Robinson Humphrey Internet equity analyst Robert Peck put a value of the patents, which number more than 6,000, to surpass $3 billion, said in a note to investors last week.

Although Verizon remains the likely top bidder to come out of this first round of bidding, don't discount Alibaba or Softbank from making a play, said Jackson. Yahoo's 15% stake in Chinese e-commerce giant Alibaba is worth about $30 billion and its 35.5% stake in Yahoo Japan is worth as much as $9 billion. Softbank co-founded Yahoo Japan with Yahoo in 1996 and it still owns 36.4%.

A Softbank representative could not be reached for comment. 

"I wouldn’t surprised me at all if all of a sudden you have one of these big players saying, 'Hey before this goes down we want to offer you X to buy back our own stake," Jackson said.

Yahoo is soliciting bids for all or part of its business under pressure of activist shareholders, including hedge fund investor Starboard Value, which supports a proxy battle for Yahoo's board in this summer's election.

"Things are going slower than they should, but the train is moving on the track and that’s good," Jackson said.


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