This stupid crook still did not get it.# Stock
A*o
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Yahoo: buyback trap
US group’s buzz has not led to growth in operating business yet
When in doubt, reduce the share count. The internet antique Yahoo announced
on Tuesday that it had upped its buyback programme by $5bn. Over the past
year, Yahoo boss Marissa Mayer has generated plenty of hype through
acquisitions, investments in web products and, well, her persona. But the
best she has been able to do with the core business is to stabilise it.
Buybacks and the rocketing valuation expectations for Alibaba (Yahoo owns a
quarter of it and it is preparing a share offering) have rallied its shares
anyway.
Even as rivals such as Facebook and Yelp are solving the riddle of ad
revenue from mobile devices, Yahoo’s massive buyback shows that its growth-
centred turnround remains some way off.
Revenue at Yahoo so far in 2013 have been flat; strong results in search
have been offset by weakness in display ad revenue, the latter off a tenth.
The company points out that traffic on Yahoo sites has grown sharply after
years of decline and that spending on deals and new engineers should
eventually lead to financial results.
Until then (2014? 2015? 2020?), Yahoo keeps buying back shares and watching
Alibaba’s valuation soar. Since 2012, it has spent $5bn repurchasing shares
and its diluted share count has dropped 15 per cent. Based on a September
2012 fundraising at Alibaba, Yahoo pegs its quarter stake in the company at
$8bn. But based on its estimates, Pivotal Research puts that value at more
like $21bn. That $13bn value explosion is worth about $12 a share and
accounts for most of the appreciation in Yahoo this year. Cleverly, Yahoo
has announced it will sell off fewer shares in the Alibaba IPO.
But for all the buzz around a refashioned Yahoo, pulling the strings on
buybacks and equity affiliates just make it look like a dowdy Exxon rather
than a dynamic Twitter. There is nothing wrong with that as Yahoo’s share
appreciation indicates. But don’t be surprised when pulling on strings
leads them to fray.
Email the Lex team in confidence at l*[email protected]
US group’s buzz has not led to growth in operating business yet
When in doubt, reduce the share count. The internet antique Yahoo announced
on Tuesday that it had upped its buyback programme by $5bn. Over the past
year, Yahoo boss Marissa Mayer has generated plenty of hype through
acquisitions, investments in web products and, well, her persona. But the
best she has been able to do with the core business is to stabilise it.
Buybacks and the rocketing valuation expectations for Alibaba (Yahoo owns a
quarter of it and it is preparing a share offering) have rallied its shares
anyway.
Even as rivals such as Facebook and Yelp are solving the riddle of ad
revenue from mobile devices, Yahoo’s massive buyback shows that its growth-
centred turnround remains some way off.
Revenue at Yahoo so far in 2013 have been flat; strong results in search
have been offset by weakness in display ad revenue, the latter off a tenth.
The company points out that traffic on Yahoo sites has grown sharply after
years of decline and that spending on deals and new engineers should
eventually lead to financial results.
Until then (2014? 2015? 2020?), Yahoo keeps buying back shares and watching
Alibaba’s valuation soar. Since 2012, it has spent $5bn repurchasing shares
and its diluted share count has dropped 15 per cent. Based on a September
2012 fundraising at Alibaba, Yahoo pegs its quarter stake in the company at
$8bn. But based on its estimates, Pivotal Research puts that value at more
like $21bn. That $13bn value explosion is worth about $12 a share and
accounts for most of the appreciation in Yahoo this year. Cleverly, Yahoo
has announced it will sell off fewer shares in the Alibaba IPO.
But for all the buzz around a refashioned Yahoo, pulling the strings on
buybacks and equity affiliates just make it look like a dowdy Exxon rather
than a dynamic Twitter. There is nothing wrong with that as Yahoo’s share
appreciation indicates. But don’t be surprised when pulling on strings
leads them to fray.
Email the Lex team in confidence at l*[email protected]
