As Buyers Circle Yahoo, Will It Be Carved Up?

Now that it’s for sale, there are several reports indicating multiple buyers are interested in some or all of Yahoo. Among the names mentioned are Silver Lake Partners, a private equity firm, Yahoo search partner and former suitor Microsoft, News Corp. and Jack Ma of China’s Alibaba, in which Yahoo owns a multi-billion dollar stake.

Reuters is reporting that Yahoo has hired the infamous Goldman Sachs and Allen & Co to help potential buyers through the due diligence process, which could take “months” according to the report.

The New York Times tries to value the various pieces of Yahoo: Alibaba, Yahoo Japan, its patent portfolio and the rest of Yahoo proper and comes to the conclusion that selling off the Asian operations, separate from the main business, could generate more than if Yahoo were sold in one piece.

As of this morning Yahoo’s total market capitalization is about $18.7 billion. But there’s an argument that the core business may not be worth much more than $5 billion according to the New York Times’ analysis.

Let’s assume that Yahoo will be sold some time in the next six months. What will be its fate? That depends of course on the buyer — entirely. A News Corp might run the company very differently than a private equity firm or Jack Ma, if Alibaba were to successfully acquire Yahoo.

Behind the speculation of who might buy the company is the question of whether Yahoo can be reinvigorated and regain momentum. This is a version of the same same question that dogs AOL, which like Yahoo was dominant at one time but has endured a long, slow decline.

Yahoo remains the second largest site online, according to comScore, after Google. Its brand still has great value and is stronger than most other brands online with only a couple of exceptions (Google, Facebook). It may also be a “more trusted” brand than Facebook. Accordingly, “it’s not too late” for Yahoo.

The buyer would need to install strong leadership and be willing to invest in the company rather than simply cut costs and outsource operations to third parties as Bartz had been doing in many cases.

I’m skeptical, however, that any financial buyer would bring the right perspective and commitment to Yahoo. A strategic buyer might do a better job. Then again we saw News Corp. preside over the demise of MySpace.

What should happen to Yahoo and which potential buyer represents the best “fit”?

Postscript by Matt McGee: Following up on what Greg references in the first paragraph above, Reuters is reporting that Microsoft is “considering a bid for Yahoo.” Reuters’ source is a “high-ranking Microsoft executive,” but the article says it’s possible that MSFT won’t follow-through on bidding for Yahoo because “there are internal divisions at the software company on whether it should pursue Yahoo again.”

Microsoft bid $45 billion to buy Yahoo in early 2008, but the deal never came to fruition.

Stock image from Shutterstock, used under license.