Yahoo! Inc. (YHOO) Succumbs To Pressure To Join Spin-Off Club


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Yahoo! Inc. (NASDAQ:YHOO) has succumbed to the pressures exerted by activist, as well as, other investors in joining the spin-off club. eBay Inc (NASDAQ:EBAY) initiated the process of spin-off efforts last year, and it caught the attention of many other companies like Hewlett-Packard Company (NYSE:HPQ). It also remains to be seen whether the company would meet the other demand of merging with AOL after acquiring it.

More than the fourth quarter financial results, investors’ were expecting Yahoo! Inc. (NASDAQ:YHOO) to spell out its plans following several rumors. It included selling of stake Alibaba Group Holding Limited (NYSE:BABA), acquiring Time Warner Inc (NYSE:TWX)’s stake in CNN or buying AOL to be merged with it later.

Spin-Off

The company disclosed that its board has given its authorization to spin-off the rest of the company’s stake in Alibaba Group Holding into a freshly established independent investment company, SpinCo. Shares of the fresh entity would be distributed to all the shareholders on a pro rata basis, which would likely be tax-free. Once the process is over, SpinCo would become a separately listed company. SpinCo would be the owner of 384 million shares of Alibaba that is worth around $40 billion.

After the spin-off, Yahoo! Inc. (NASDAQ:YHOO) said that it would continue to manage its core business and also hold 35.5% stake in Yahoo Japan. The company indicated that SpinCo would not have any debt in the transaction and that it would retain its cash.

The completion of the transaction is predicted to be over during the fourth quarter of the current calendar year once the expiry of the lock-in period was over on transferring shares of Alibaba. The ratio of shares would be announced later.

4Q Results

The company reported net earnings of $166 million, down 52.3% from $348 million. Similarly, earnings dropped 48.5% to 17 cents a share from 33 cents a share in the year-ago quarter. On an adjusted basis, earnings would have fallen 35% to 30 cents a share from 46 cents a share in the prior year quarter.

Yahoo! Inc. (NASDAQ:YHOO)’s GAAP revenue slackened to $1.253 billion from $1.266 billion. Revenue, excluding traffic acquisition costs, slipped 1.8% to $1.179 billion from $1.2 billion in the previous year quarter. Street analysts’ predicted the company to earn 29 cents a share and revenue of $1.19 billion.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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