By Sanjay Achar '17
The recent IPO of Alibaba has left investors questioning whether their struggling company, Yahoo!, still has the revenue generating components to justify its expenses. Yahoo! made $5.8 billion on the deal, and said it would return at least half of the cash to investors in the form of a dividend or stock buyback. Currently investors value Yahoo! at $38 billion, based on the company’s closing price of $38.45 this past Friday. This is a 10% drop from its eight-year high of $42.88, just before the Alibaba IPO. While Yahoo! did lose a large market in the Alibaba IPO, something for investors to consider is the values of the large series of acquisitions that Yahoo! has made over the last year, and possible ways that Yahoo! will use its newly freed cash.CEO Marissa Mayer has received pressure from activist investor Starboard, which had recently taken a stake in Yahoo! and sent a letter to the CEO pushing the company to reduce costs, look into a merger with AOL, consider splitting its core business from the Asian assets and halt its acquisition strategy, which Starboard claims cost the company upwards of $1 billion, and generated little shareholder value. Ms. Mayer is expected to detail her plan for turning the company around when the company releases its third-quarter results this Tuesday.Already, Yahoo! has laid off 400 employees in Bangalore, India, representing about 3% of Yahoo!’s total staff, in order to cut costs. Additionally, it is closing its office in Amman, Jordan, eliminating 80 jobs, and pulling back its operations from the Middle East by five years. Yahoo! also stated that it plans to reinvest a small portion of the cash it generated from the Alibaba IPO in Snapchat. Someone familiar with the matter said Yahoo! is looking to invest about $20 million, at Snapchat’s $10 billion dollar valuation.With their recent loss of a large part of their business and freed up cash, pressure from shareholders will likely only increase until Yahoo! implements more serious change in their business, as they have already started to do. Their upcoming quarterly earnings report has the potential to sway shareholder opinions of management, and impact how severe these changes will be, and how quickly these changes will take place. As a hedge to the uncertainty of the stock price, it should be comforting to investors to know that $2.9 billion will be distributed among shareholders in the near future. Sources:http://online.wsj.com/articles/yahoo-ceo-set-to-refresh-turnaround-plan-1413760289?mod=ST1http://online.wsj.com/articles/yahoo-to-close-jordan-office-and-cut-80-jobs-1413316900?mod=ST1http://blogs.wsj.com/indiarealtime/2014/10/08/yahoos-cost-cutting-hits-indian-workers/?mod=ST1http://online.wsj.com/articles/yahoo-nears-investment-in-snapchat-1412361684?mod=ST1Photo:http://www.cmswire.com/images/Marissa%20Mayer%20at%20TechCrunch%2050%202008.jpg