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Report: AOL, buyout firms mulling bid for Yahoo
SAN FRANCISCO (AP) - Yahoo Inc.’s inability to snap out of a financial funk may be about to turn the embattled Internet company into a takeover target for the second time in less than three years.
That possibility, floated in a story posted online late Wednesday by The Wall Street Journal, lifted Yahoo’s shares by nearly 13 percent in Wednesday’s after-hours trading.
If Yahoo gets another offer, it will likely be for considerably less than what the company could have gotten had it embraced Microsoft. Yahoo’s market value now is less than $25 billion, even after factoring in the runup from the takeover speculation.
Still, it appears AOL realizes it would need to bring in more financial muscle to get a deal done. The company, based in New York, is discussing the possible Yahoo offer with several firms that specialize in buying companies whose stocks have fallen out of favor, according to the Journal.
Yahoo has been testing the patience of its shareholders for the past four years, as its financial performance flagged while the once-smaller Google Inc. blossomed into the Internet’s most profitable company. More recently, Yahoo has been upstaged by rapidly growing Web hangouts such as Facebook and Twitter.
Three different CEOs have tried to turn around Yahoo with little success. After former movie studio boss Terry Semel resigned under shareholder pressure in mid-2007, Yahoo co-founder Jerry Yang took over the helm and wound up spending much of his reign trying to fend off Microsoft’s advances.
While trying to thwart Microsoft, Yang discussed possible deals with AOL while it was still part of Time Warner Inc. and with News Corp., which owns MySpace.com in addition to The Wall Street Journal and the Fox television network.
Yahoo, which is based in Sunnyvale, promised better times when it brought in tough-talking Silicon Valley veteran Carol Bartz as CEO in January 2009, but she hasn’t been able to spur revenue growth so far.
Some of Bartz’s comments also may have ruffled some feathers at Alibaba Group, a Chinese Internet company in which Yahoo owns a 39 percent stake. If that’s true, Alibaba CEO Jack Ma conceivably could help potential Yahoo bidders to finance a takeover by agreeing to buy back Yahoo’s stake in his company after a deal is done.
The specter of a possible takeover bid will likely intensify the interest in Yahoo’s third-quarter earnings report due out next Tuesday. Analysts are already bracing for another round of lackluster results, and if that holds true, it could set the stage for an offer.
By Brahma Chellaney
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