September 16, 2014
The recent announcement made by Alibaba, the China-based online giant, to launch an IPO for sale of its 320.1 million American depository shares on Wall Street could impart new life in the fading Internet pioneer Yahoo. Yahoo stock price is also expected to soar with Alibaba IPO
In 2005, Yahoo bought a 40% stake of the Chinese firm for USD 1 billion and currently holds around 22.4% of Alibaba. It is expected that the US company would raise USD 7-9 billion by selling around 6.1% stake of Alibaba’s shares. The Alibaba IPO announcement came at a time when Yahoo is seeking to re-establish itself under the leadership of Chief Executive Marissa Mayer.
Mayer was appointed in 2012 as CEO by Yahoo’s management in order to redefine the company’s mission after it took a back seat to Google and others.
According to market-experts, the cash offers Yahoo an opportunity, but the company needs to use it in ways to yield more productively.
While commenting on the Alibaba IPO sale, an expert at Global Equities Research said: “Alibaba is giving rocket fuel to Yahoo and the only effort the company needs to put in is to develop the engines to use it.”
Earlier in July, Yahoo said that the majority of the proceeds of the sale of Yahoo’s stake would be returned to shareholders. Meanwhile, the remaining amount could help fuel acquisitions to help Yahoo boost its sagging revenue base, after the reported 4% year-on-year decline in the latest quarter
Mayer has been on a buying spree, which includes the deal of blogging platform Tumblr in 2013. The CEO has called the Tumblr deal, which was worth USD 1.1 billion, a part of the company’s effort to draw in younger Internet users.
Experts believe that Yahoo should also use some of the cash on its research and development wing in order to improve some of its existing services, which includes Yahoo Mail, Yahoo Finance and Web hosting and the services it offers for small-scale business. However, it is still not clear if Yahoo will be able to woo its users and investors with products and services like its competitors in the sector such as Apple or Google.
Mayer has been moving the company toward more online video and has plans to produce Yahoo’s own entertainment programs. This is the company’s effort to go along with news and music and in future challenge Google-owned YouTube.
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