February 23, 2024

Yahoo Profit Rises 36%, Exceeding Expectations

Since Marissa Mayer left Google to lead Yahoo nine months ago, the company’s stock is up more than 50 percent, buoyed less by optimism in Yahoo than Wall Street’s giddiness over Alibaba, the Chinese Internet company in which Yahoo retains a 20 percent stake.

Alibaba has signaled that it is preparing for an initial public offering that analysts predict could value it at $55 billion to more than $120 billion, double to five times more than Yahoo’s $26.2 billion market capitalization.

“If you own Yahoo for Alibaba, you’re doing just great,” said Colin Gillis, an Internet analyst at BGC Partners. “But if you own it for the core business, you’ve got some speed bumps.”

On Tuesday the company reported that net income in the first quarter rose 36 percent to $390 million, or 35 cents a share, from the year-ago quarter. Wall Street analysts had expected net income of 24 cents a share.

But much of that was because of Alibaba. The income contribution from Yahoo’s equity interests in Alibaba and Yahoo Japan was $217.6 million, well above its own first quarter operating income of $186 million.

Meanwhile, Yahoo’s revenue was down. The company said revenue was $1.14 billion, down 7 percent from the year-ago quarter. Excluding traffic acquisition costs, revenue was flat at $1.07 billion. That news sent Yahoo’s stock down about 4 percent in after-hours trading, after closing at $23.79 on Tuesday.

Yahoo reported first-quarter earnings at a critical juncture for Ms. Mayer. Investors are eager to see whether she can increase revenues, which have languished in an increasingly competitive landscape.

Once the biggest seller of display ads, Yahoo lost that position to Facebook and Google in 2011. In the first quarter, Yahoo’s display ad business fell 11 percent, to $455 million, compared with a year ago, even as total display advertising increased 18.1 percent to $17.7 billion in the United States, according to eMarketer.

Ms. Mayer told analysts Tuesday that she planned to lure back advertisers by starting a “chain reaction” that begins with hiring engineers to improve Yahoo’s core products, which include e-mail, sports and finance offerings, and optimizing them for Yahoo’s mobile and tablet users.

Without its own mobile hardware, browser or social platform, Yahoo, which is based in Sunnyvale, Calif., has a long way to go in mobile. Ms. Mayer has said she plans to quickly develop a mobile presence through “smaller-scale acquisitions” of mobile app companies. She has acquired six start-ups since joining Yahoo, as much for their engineering talent as for their products.

Ms. Mayer has put those engineers to work making Yahoo’s Web products more applicable to mobile users. Those efforts seem to have paid off. Yahoo now has more than 300 million monthly mobile users, up from 200 million three months ago.

Article source: http://www.nytimes.com/2013/04/17/technology/yahoo-reports-quarterly-earnings.html?partner=rss&emc=rss

DealBook: In Buyback Deal, Alibaba Gets Half of Yahoo’s Stake

Jack Ma, chief of the Alibaba Group, addressed the 2011 Netrepreneur Summit in Hangzhou, China.Lang Lang/ReutersJack Ma, chief of the Alibaba Group, addressed the 2011 Netrepreneur Summit in Hangzhou, China.

8:14 p.m. | Updated

Yahoo closed on the sale of half of its stake in the Alibaba Group of China, the company said Tuesday, giving it $3 billion to return to its shareholders.

Some investors had fretted that Yahoo would decide against doling proceeds from the sale to shareholders, after the company’s new chief executive, Marissa Mayer, said last month that she was “reviewing” its business strategy. To some, it suggested that Ms. Mayer, a former Google executive, was more keen to hold onto the money for some other use, including acquisitions.

But it appears that Ms. Mayer has decided that a payout to investors, including the hedge fund manager and Yahoo board member Daniel S. Loeb, who holds about a 6 percent stake, was in the company’s best interest.

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It has already spent $646 million on stock buybacks since May, in what it called a “down payment” to its stockholders.

In selling about 20 percent of Alibaba’s stock back to the company, Yahoo will reap about $7.6 billion before taxes. The $3 billion represents about 85 percent of the net cash proceeds from the sale, with Yahoo also receiving preferred shares in its partner.

The deal, struck in May, is part of a comprehensive agreement worked out between Alibaba and Yahoo, beginning the transformation of a partnership that has often proved contentious.

The two companies’ alliance began when Yahoo bought a 40 percent stake in Alibaba in late 2005. But as Yahoo began to falter, falling behind newer rivals like Google and then Facebook, its stake in Alibaba leapt in value.

As of Tuesday afternoon, Yahoo’s remaining stake in Alibaba was valued at about $8.1 billion, representing about 43 percent of the American company’s $18.9 billion market value.

Over the last few years, both sides have engaged in on-again, off-again talks about the return of that stake.

Under the terms of the agreement, Yahoo will sell half of its stake back now. It will sell an additional 10 percent of Alibaba when the Chinese Internet company files to go public in the next few years, and then divest the remainder sometime after that.

For Alibaba, Tuesday’s announcement is the biggest step yet toward its long-held goal of regaining full control of its future. Still privately held, it has taken a number of steps toward becoming publicly traded, including finally striking a deal with Yahoo.

Alibaba has spent the last several months crisscrossing the world, raising the requisite financing for the stock buyback from investors like the China Investment Corporation, the Chinese private equity firms Boyu Capital and Citic Capital and the China Development Bank. Existing investors like Silver Lake, DST Global and Temasek also participated.

And it arranged $2 billion in financing from a number of international banks.

“The completion of this transaction begins a new chapter in our relationship with Yahoo,” Jack Ma, Alibaba’s chairman and chief executive, said in a statement. “We are grateful for Yahoo’s support of our growth over the past seven years, and we are pleased to be able to deliver meaningful returns to our shareholders including Yahoo.”

Ms. Mayer said in a statement: “This yields a substantial return for investors while retaining a meaningful amount of capital within the company to invest in future growth.”

Article source: http://dealbook.nytimes.com/2012/09/18/alibaba-closes-deal-to-buy-back-shares-from-yahoo/?partner=rss&emc=rss

DealBook: Alibaba Said to Seek Billions to Buy Back Yahoo Stake

Alibaba's headquarters in Hangzhou, China. The online retailer wants to repurchase part of Yahoo's stake for $7.1 billion.Nelson Ching/Bloomberg NewsAlibaba’s headquarters in Hangzhou, China. The online retailer wants to repurchase part of Yahoo’s stake for $7.1 billion.

The China Investment Corporation is in advanced talks to add as much as $2 billion to the Alibaba Group to help finance the Internet company’s efforts to buy back a stake from Yahoo, a person briefed on the matter said on Thursday.

The Chinese Investment Corporation, known as C.I.C., a $200 billion Chinese sovereign wealth fund, is one of several potential partners from which Alibaba would raise money to pay for the stake repurchase. On Sunday, Alibaba announced a long-awaited deal to buy back half of Yahoo’s 40 percent stake in the company for $7.1 billion.

To finance the purchase, Alibaba is raising about $4.6 billion in total. The Chinese Internet company is holding talks with a number of other firms, including Temasek, a Singaporean sovereign fund; DST Global, the Russian investment firm; and the Blackstone Group, according to the person and others briefed on the discussions, who sought anonymity because they were afraid they would lose their jobs.

The pact with Yahoo values Alibaba at about $35 billion, though that figure could rise if the Chinese company is able to raise financing at a higher valuation.

Over the last several years, Alibaba has undertaken several moves that could lead to its transformation, including steps toward an initial public stock offering down the road. On Thursday, Alibaba was completing the takeover of its publicly traded subsidiary, Alibaba.com.

But the biggest move has been securing an agreement with Yahoo over the repurchase of the stake, which begins the unwinding of an often tense partnership.

While Yahoo’s investment in Alibaba in 2005 helped the Chinese company become a premier Internet and e-commerce player in that country, the two have clashed over a number of issues. Perhaps the bitterest conflict began in 2010, when Alibaba decided to spin off Alipay, its online payment business. Yahoo protested that it had not been properly consulted before the move, setting up a battle that was resolved only last summer.

Alibaba first sought to buy back some of the stake Yahoo held several years ago, but the American company backed out late in the process. The abrupt end to the discussions was believed to have rankled Jack Ma, Alibaba’s chief executive, who felt that the break had hurt his relationships with companies that had agreed to back that first repurchase agreement.

Alibaba and Yahoo resumed talks late last year, hoping to reach a deal on a complicated transaction known as a cash-rich split, which would have amounted to a tax-free asset swap. But those talks ran aground earlier this year over a number of concerns, including breakup fees and the valuation of Alibaba.

The two tried again in March, aiming for a simpler deal in which the Chinese company would buy back some of its stake directly. Talks between the two companies — led by Alibaba’s chief financial officer, Joe Tsai, and his Yahoo counterpart, Timothy R. Morse — proceeded smoothly in the final effort at negotiations, with many details being decided fairly quickly.

It now appears that a new détente has emerged. Yahoo, for instance, has agreed to give up certain voting powers and an ability to name a second director to Alibaba’s board as part of the stake repurchase agreement announced on Sunday.

That may help allay concerns by Chinese regulators that Alibaba is controlled by foreign investors, worries the company has been keen to eliminate.

News of Alibaba’s talks with C.I.C. was reported earlier by Reuters.

Article source: http://dealbook.nytimes.com/2012/05/24/china-investment-corp-in-talks-for-alibaba-stake/?partner=rss&emc=rss

DealBook: Yahoo Board to Pursue Sale of Asian Assets

Yahoo‘s board decided on Friday to proceed with negotiations to sell the bulk of its shares in the Alibaba Group and Yahoo Japan to its Asian partners, according to a person with knowledge of the matter. A deal, which involves a complicated asset swap with Alibaba and Softbank, values the holdings at roughly $17 billion.

Shares of Yahoo were relatively flat on Friday, rising about 1 percent, to close at $16.19.

Although the troubled Internet portal is moving closer to a transaction that could yield a significant cash infusion, people close to the matter said a deal may not be finalized for many weeks.

It is also unclear whether the board will pursue a separate minority investment from its private equity suitors, Silver Lake and TPG Capital, both of which made offers last month. Silver Lake has not walked away from a possible deal, but is currently in a holding pattern, while the board resolves its Asian investments, according to another person with knowledge of the matter, who spoke on the condition of anonymity because talks are private.

For the last three weeks, Yahoo has been in discussions with Alibaba and Softbank, to hammer out a deal that will allow Yahoo to sell its shares in a tax-free manner.

Under the terms of the current proposal, Alibaba and Softbank, the largest shareholder of Yahoo Japan, will create new subsidiaries, holding a mix of cash and operating assets. Yahoo will then exchange the bulk of its stake in Alibaba and all of its shares in Yahoo Japan for these subsidiaries. The deal, known as a tax-free cash-rich split, values Yahoo’s 40 percent stake in Alibaba at roughly $12 billion and its 35 percent stake in Yahoo Japan at $5 billion. Yahoo will retain a 15 percent stake in Alibaba.

Article source: http://feeds.nytimes.com/click.phdo?i=d36a6b6f4b4975ed91f3c0252eb2bce8

DealBook: Yahoo and Alibaba Resolve Alipay Dispute

Carol A. Bartz, left, chief of Yahoo!, and Jack Ma, chief of Alibaba Group.Ramin Talaie/Bloomberg News and Jason Lee/ReutersCarol A. Bartz, left, chief of Yahoo!, and Jack Ma, chief of Alibaba Group.

After a simmering feud that reached soap opera proportions, Yahoo and the Alibaba Group, the Chinese Internet company it partly owns, have reached an agreement on Alipay, a Chinese payments processing company.

Alongside Softbank, a major Alibaba investor, the companies announced on Friday a multipronged deal that guarantees Alibaba certain payments in the event of an Alipay public offering or other liquidity event. If Alipay does go public, Alibaba will be paid at least $2 billion plus certain licensing fees. Under the agreement, Alipay has also agreed to maintain its current relationship with Taobao, one of Alibaba’s top e-commerce companies.

“Over the last few months, we have worked cooperatively with our partners at Yahoo! and SoftBank to reach an agreement that serves the interests of all parties,” Jack Ma, Alibaba chief executive said in a statement. “Most importantly, Alipay was able to secure the license it needed to continue operating.”

The resolution is a welcome one for Alibaba’s investors, Yahoo and Softbank, which have been trying to hammer out a deal with Alibaba for several months. Last year, Mr. Ma spun Alipay out of Alibaba to secure licenses to operate as an electronic payments platform, amid new regulations in China. The company’s partners cried foul in May of this year, with Yahoo and Softbank claiming that they had not approved the spinoff and only learned about the deal in March. The debacle irked investors, who were bothered by Yahoo’s lack of knowledge and the loss of Alipay’s value to Alibaba’s portfolio.

David Einhorn, the influential hedge fund manager of Greenlight Capital, dumped his entire stake in Yahoo, saying in a letter to investors that this “wasn’t what we signed up for.”

In the immediate aftermath, shares of Yahoo lost about a third of their value. Yahoo’s 43 percent stake in Alibaba is considered by many to be its crown jewel, worth more than the company’s domestic business, which has struggled to regain turf from rivals like Google.

“This is a good outcome for Yahoo! and for our shareholders, as well as all the parties to this agreement,” Carol Bartz, the chief executive of Yahoo said in a statement on Friday. “As a result of this constructive process, we have an agreement that preserves the value of Taobao, provides for profit sharing at Alipay, and creates a structure to allow Alibaba Group to participate if Alipay’s value is realized in an I.P.O. or other liquidity event.”

Under the terms of the agreement, Alibaba will receive “no less than $2 billion and no more than $6 billion in proceeds,” in a Alipay liquidity event. The amount of the proceeds will be calculated by multiplying Alipay’s valuation by 37.5 percent. The formula implies that Alibaba expects Alipay to be worth at least $5.3 billion in the event of a public offering.

While the agreement does bring resolution to a contentious issue, investors remained cautious on Friday.

Shares of Yahoo initially traded higher, before falling about 3 percent in morning trading, after a conference call in which both Mr. Ma and Ms. Bartz were both noticeably absent. Their lack of attendance fanned concerns, among some analysts, that the deal has not mended the rift between the two companies.

“On the face of it, it seems like a good deal for Yahoo, given how acrimonious the relationship with Jack Ma and Carol Bartz had become and how little leverage Yahoo had,” Jordan Rohan, a Stifel Nicolaus analyst told DealBook on Friday. But he said the drama also exposed how Yahoo’s fate in Asia is dictated by the whim of Mr. Ma.

“Even if the ownership of the rest of Alibaba group is not altered, the path forward seems to be controlled 100 percent by Jack Ma and his team,” he said.

The possible heavy hand of China’s government also looms large. Given the country’s strict regulatory environment, analysts raised doubts on Friday that an Alipay offering will come soon or be as lucrative as Yahoo hopes.

“They did not give any clarity on a potential timeline for an I.P.O.,” said Scott Kessler, an analyst with Standard Poor’s. “The Chinese government also seems focused on domestic ownership for this company, thus making any global I.P.O. unlikely if not impossible.”

Article source: http://feeds.nytimes.com/click.phdo?i=0fa4e910db21cfae88ebbfea76b6d0bb

Bits: Partial Agreement Seen in Yahoo-Alibaba Dispute

Yahoo and Alibaba Group have informally agreed to end a three-week old dispute over the ownership of the Chinese payment service, Alipay.

But the deal is far from final because Softbank Corporation, the other party in the talks, has yet to agree, according to a person who was briefed on the matter and demanded anonymity because of the sensitivity of the negotiations.

The agreement between Yahoo and Alibaba, a Chinese Internet company in which Yahoo owns a 43 percent stake, is still a major sign of progress. The two companies have publicly feuded about Alibaba’s transfer of its Alipay online payment service to a separate company.

Investors feared that the surprise shift in ownership had eroded the value of Yahoo’s stake in Alibaba. Wall Street values Yahoo in large part because of its investment in Alibaba, which controls several e-commerce sites including the China’s equivalent of eBay.

News of the ownership uncertainty triggered a 12 percent decline in Yahoo’s shares. They recovered 3.3 percent on Tuesday to close at $16.55 based on a potential resolution to the dispute.
Any such deal would depend on Softbank, the Japanese technology company that also owns a large stake in Alibaba. Softbank, which is taking part in the negotiations, has so far been unwilling to agree.

The talks center on how much Alipay’s new owners must compensate Alibaba. What is unusual about the negotiations – and worrisome to Wall Street — is that they are taking place after the transfer occurred, not before, as is customary for business deals.

Yahoo has said it only learned of the transfer in March, months after the fact. Alibaba has argued that Yahoo had known for a while that a transfer was necessary to comply with Chinese laws that require local ownership.

Last week, Carol A. Bartz, Yahoo’s chief executive, dodged an onslaught of questions about Alibaba and the negotiations at her company’s investor day. She portrayed the discussions as making progress, but she did not divulge many new details.

On Tuesday, Yahoo would only say that it continued to be pleased with the progress of the talks. Alibaba declined to comment.

Reuters news service first reported Yahoo’s agreement with Alibaba, along with Softbank’s reticence, on Tuesday.

Article source: http://bits.blogs.nytimes.com/2011/05/31/partial-agreement-seen-in-yahoo-alibaba-dispute/?partner=rss&emc=rss