Shares in Yahoo jumped yesterday on news that the board were considering options for disposing of its core internet business and reforming the company as a custodian of its share of Alibaba.
This makes no sense.
I don't mean the idea of disposing of the core internet business. That has been an obvious step for most of the last decade. Turning down Microsoft's 2008 bid for the business was probably the worst decision in the company's history.
Reforming around Alibaba makes some sense, as its stake is currently valued at $30bn. Whether there's actually much business to do as a result is another matter.
The whole question will swing on how much Yahoo is able to lay off its assets for. Since Marissa Meyer took over the reins the company has been profligate in its spending and acquisition strategy.
Is there an expectation that it can sell of the whole unbalanced mess which would form the rump of the non-Alibaba business for anything like the cost of its recent acquisitions? I certainly don't believe so.
The company is currently valued at around $31bn. Almost exactly $1bn more than the value of its Alibaba stake. Meaning the rest of the business is currently valued at less than it paid for Tumblr just two years ago.
Nice work. Not.
So what doesn't make sense? The idea that the stock's value would jump on the prospect of a sale, that's what. Unless Apple decides it wants to turn the whole mess around I can't see anyone digging in their pockets for the business, either as a whole or hived off into smaller more digestible chunks.
Time to put the Yahoo we once know on death watch? I would say so. Seven years ago I wrote that if Yahoo failed to reach agreement with Microsoft it would be the end of the company. The fulfilment of that prophecy is looking ever more imminent.