Yahoo chief Marissa Mayer seems finally to be acquiescing to shareholders’ demands but keeps talking as if she isn’t. In announcing earnings yesterday, which weren’t good, board chairman Maynard Webb said the magic words “exploring additional strategic alternatives,” which he said would be “in the best interest of our shareholders.” Translation: The company is not just open to selling its core web businesses, it will be investigating ways to do it.
That is what Starboard Value chief Jeff Smith has been urging for months. Yet as Webb announced this significant change of stance, Mayer seemed to be speaking from a parallel universe in which it hadn’t happened, detailing a plan “to accelerate Yahoo’s transformation” and painting a rosy picture of the company’s fabulous performance. In the universe inhabited by the rest of us, the earnings report showed the lowest revenues since she arrived as CEO 3 ½ years ago; it announced that Yahoo would close five offices and get rid of about 1,600 employees; and it disclosed that several key parts of the company were together worth $4.5 billion less than previously thought, requiring an impairment charge to earnings.
It gets weirder. Webb also affirmed that the company would continue working on its plan to spin off its web businesses into a separate company, leaving Yahoo as primarily a vessel for its hugely valuable stake in Alibaba. Investors have been clamoring for Yahoo to separate the Alibaba holding and its stake in Yahoo Japan from the operating businesses, since the two Asian properties account for virtually all of Yahoo’s market value. But Starboard’s Smith has argued against the spin off because it could take a year to execute, and he’s afraid Yahoo’s web businesses are deteriorating so fast that they should just be sold– which Yahoo said yesterday it will explore doing. But in the meantime it’s sticking with plan A.
Yesterday’s report suggested at least one more disorienting comparison. Analysts have estimated that Yahoo’s operating businesses account for around $3 billion of the company’s $27-billion market cap. But if, as Yahoo just announced, they’re worth $4.5 billion less than previously recorded, then how much are they really worth? Accounting wonks know this isn’t necessarily a contradiction, but it puts an exclamation point on the decline of Yahoo’s performance.
Why so much cognitive dissonance from Mayer yesterday? My guess is that it’s a valiant effort to keep employees onboard, maintain performance as much as possible, and get the highest prices from eventual buyers of the businesses. In doing so, she may well be making the best of a bad situation. But in saying that her plan “will dramatically brighten our future,” and in telling the WSJ that she’s “very much looking forward to the turnaround plan that I have presented today,” I doubt she’s persuading anyone that the plan will get much of a chance to work before other owners impose plans of their own.
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