Yahoo to spin off main business into separate company

By Barry Eitel

SAN FRANCISCO

Yahoo announced Wednesday a new plan to spin off its core Internet business into a new company.

The new company will include its search engine, advertising technology and the recently acquired blogging platform Tumblr. The original Yahoo would then become a holding company for several valuable investments in Asian businesses.

Known as a reverse spinoff, the plan reflect Yahoo’s complicated revenue structure.

The company’s Internet business is worth roughly $4 billion but it owns a large stake in Chinese e-commerce behemoth Alibaba that is worth approximately $20 billion.

It also owns 35 percent of Yahoo Japan, a joint venture with Japanese tech company SoftBank, a stake worth another $5 billion.

After years of losing ground to competitors, including Google, Yahoo was considering selling its foreign investments. Investors were concerned that a large tax on spinning off these stakes would actually make Yahoo’s core business worth less than nothing, which is why the company decided to spin off its business into a new company instead.

The spinoff will require government and shareholder approval. The company said the new plan will take at least a year to implement.

“In 2016, we will tighten our focus and prioritize investments to drive profitability and long-term growth,” Yahoo CEO Marissa Mayer said in a statement. “A separation from our Alibaba stake, via the reverse spin, will provide more transparency into the value of Yahoo’s business.”

Mayer, who said she plans to stay on with the company, has had a troubled three-year tenure as chief executive marked by a series of acquisitions that failed to bolster the company’s core business, including the 2013 purchase of Tumblr for $1.1 billion.

Stakes of Yahoo, which was founded in 1994 and became the most popular starting point for Web users in the 1990s, were down over 2.5 percent amid the news.