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Dying Yahoo! Up for Sale. Should Microsoft Consider Buying It ?

Yahoo!, the company that was once the brightest star of dot com era is continuing to be more rusty with time.

The Internet company’s board recently ousted its CEO Carol Bartz and now, the board is finally considering sellout of the whole company. May be, that should have been done much earlier but better late than never.

Current market valuation of Yahoo! is little north of $18Bn, which is far, far lesser than what was offered to Yahoo! by Microsoft couple of years back.

Yahoo! board members must be cursing the day when Jerry Yang rejected Microsoft’s lucrative buyout offer, valuing the company at a healthy $45Bn but fate had different things planned for Yahoo!

Even after getting Carol Bartz as the dying company’s new face, the revival plan didn’t appear to work from the early days itself.

Cost cutting, layoffs, sell-out of assets helped temporarily to certain extent but Yahoo! had no clear vision on how it would re-establish itself as a ‘product company’ yet again.

And then came the Microsoft-Yahoo! deal, which killed the last chance for Yahoo! to reinstate itself as a product company. Carol Bartz strongly defended her decision of adopting Microsoft’s Bing search technology to power Yahoo! search by announcing a 10 year pact with Microsoft with a revenue-sharing model to benefit both the parties.

But almost all major decisions that Carol Bartz took during her tenure at Yahoo! resulted in eventual decline in company’s assets and depleted company stocks to a new low, quarter after quarter.

Fast forward to today, Yahoo! is still in a state of ‘limbo'(although its interim CEO categorically denies that) and doesn’t know what to do with their business to bring back those days of glory. They’re desperately hunting a new face for the CEO position at Yahoo! and also considering options for an outright acquisition by interested parties.

Yahoo!, although a dying web company, is still a big fish in the market and only few tech companies can afford to buy it. Out of those few companies, only handful of companies will gain something meaningful out of Yahoo! assets and business. Microsoft is one of them.

Although Microsoft already enjoys a search deal with Yahoo!, it still has a long way to go when it comes to competing with Google in Internet space, whether it be advertising, search market or media outreach.

Yahoo! is more of a media company than a product company and that’s something Microsoft may be interested in. Microsoft also has a chance of reviving Yahoo! by innovating in media space and doing what several CEOs couldn’t do for Yahoo! during last couple of years.

It’s Microsoft that made a $45bn buyout offer to Yahoo! years ago and now,  buying the same Yahoo! for just over $18bn would automatically become a sound financial investment, if not a fantastic one.

But there are couple of caveats too. Is Yahoo! really recoverable anymore ? A large chunk of Yahoo! valuation comes from its stake in Alibaba and therefore, there isn’t much valuation for the core media business of Yahoo! Search deal is already in existence so search share isn’t that crucial anymore.

It will be a tough call for Microsoft to buy Yahoo!(if at all) but Microsoft will certainly consider a possible buyout, albeit, with much less interest in negotiations and offering a lucrative price to Yahoo! shareholders.

We will be covering more on this news as it develops further.

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