YAHOO & ALIBABA
BACKGROUND
In 2005 , Yahoo Invested in Alibaba. Both companies entered in a TIPLA ( Tech. & Intel. Property Licence Agreement), In which Alibaba would pay a percentage of its Total revenue, 2 % per year. For 2012 and 2013 , Yahoo received $95 million and $93 million . However in 2012, the TIPLA was amended, and Alibaba paid a lump sum of $548 million to Yahoo. When Alibaba goes public in a few weeks, these royalty fees will stop and , Yahoo will have to sell 9 % of its stake in Alibaba (will receive about $8 Billion after tax).
ALL THAT CASH
- What will C.E.O. Marissa Mayer do with all that money ? well based on her track record , seems like more acquisition will be made.
"........When we look at the investments we need to make in the business, you’ll see the same type of mix we’ve been making to date. Some strategic acquisitions, some tuck-in acquisitions, and we really need to see what opportunities arise in terms of the ways we could deploy the cash at that time........” is that the right strategy ???
- Yahoo made a dozen acquisitions last year , including (over)paying $1.1 billion for blogger platform Tumblr.
- Tumblr is actually LOSING money .
WHAT INVESTORS WOULD LIKE TO SEE:
- Share Buyback : This usually increase the value of the shares ( in Theory)
- One Time dividend payment to shareholders
- Assurance : No more acquisitions of companies that generate no revenue.
TECHNICALS
- YHOO is currently at its long term support ( green line) , but also trading in a descending channel. Will be interesting to see how the stocks trades after the Alibaba IPO.
CONCLUSION
Yahoo has struggled to increase revenue over the past few years and it's ads business is trailing behind its competitors ( FB , GOOG, TWTR ).
"....... The fact that mobile, social and video are still immaterial to Yahoo’s revenue paints a very sharp picture of how much catch-up work Yahoo still has to do....", Mark Mahaney, RBC CM.
Investors that bought Yahoo shares specifically to have some exposure to Alibaba, will simply sell their stocks and buy Alibaba. When Alibaba goes public, shareholders will expect better results from Mrs. Mayer and her executives.
Cheers
Algo
In 2005 , Yahoo Invested in Alibaba. Both companies entered in a TIPLA ( Tech. & Intel. Property Licence Agreement), In which Alibaba would pay a percentage of its Total revenue, 2 % per year. For 2012 and 2013 , Yahoo received $95 million and $93 million . However in 2012, the TIPLA was amended, and Alibaba paid a lump sum of $548 million to Yahoo. When Alibaba goes public in a few weeks, these royalty fees will stop and , Yahoo will have to sell 9 % of its stake in Alibaba (will receive about $8 Billion after tax).
ALL THAT CASH
- What will C.E.O. Marissa Mayer do with all that money ? well based on her track record , seems like more acquisition will be made.
"........When we look at the investments we need to make in the business, you’ll see the same type of mix we’ve been making to date. Some strategic acquisitions, some tuck-in acquisitions, and we really need to see what opportunities arise in terms of the ways we could deploy the cash at that time........” is that the right strategy ???
- Yahoo made a dozen acquisitions last year , including (over)paying $1.1 billion for blogger platform Tumblr.
- Tumblr is actually LOSING money .
WHAT INVESTORS WOULD LIKE TO SEE:
- Share Buyback : This usually increase the value of the shares ( in Theory)
- One Time dividend payment to shareholders
- Assurance : No more acquisitions of companies that generate no revenue.
TECHNICALS
- YHOO is currently at its long term support ( green line) , but also trading in a descending channel. Will be interesting to see how the stocks trades after the Alibaba IPO.
CONCLUSION
Yahoo has struggled to increase revenue over the past few years and it's ads business is trailing behind its competitors ( FB , GOOG, TWTR ).
"....... The fact that mobile, social and video are still immaterial to Yahoo’s revenue paints a very sharp picture of how much catch-up work Yahoo still has to do....", Mark Mahaney, RBC CM.
Investors that bought Yahoo shares specifically to have some exposure to Alibaba, will simply sell their stocks and buy Alibaba. When Alibaba goes public, shareholders will expect better results from Mrs. Mayer and her executives.
Cheers
Algo
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