Alibaba Is the Gift That Keeps on Giving to Yahoo — Once Again
If you have to turn in a weak report to Wall Street investors, it’s nice to have a pretty little gift to deliver to investors to pull out of your back pocket to assuage the expected disappointment.
And that’s just what Yahoo did today, noting that it did not have to sell as many shares of its large stake in China’s Alibaba Group, which has pretty much been responsible for Yahoo’s recent stock surge.
Yahoo said today it had down earnings and revenue in its third-quarter report — not an easy thing to pull off as comparable performances across the industry show substantial gains — in its key advertising businesses.
So what, as long as a great bet in China rides to the rescue time after time?
That’s why Yahoo also copiously touted Alibaba’s performance in its Q3 results, which showed a 145 percent rise in net income and a 61 percent rise in revenue.
(This is, shall we say, very impressive.)
And that’s why fully half of Yahoo’s market value is due to the stellar financials and enormous expectations for the IPO of the Asian e-commerce giant. Yahoo still owns a 23 percent share of Alibaba, which has been akin to a rainy-day fund that never ends for CEO Marissa Mayer.
Today, Yahoo continued to tap into that gold mine — created years ago when former Yahoos Terry Semel and Jerry Yang made an investment in the then-fledgling Alibaba — by disclosing that it now does not have to sell as much of its stake in Alibaba’s upcoming public offering as had been required in a previous agreement.
Yahoo now has to unload only 39.7 percent of its assets — 208 million shares — instead of nearly half (261.5 million). That means, it can ride the gains expected in the much anticipated IPO.
Given the help Alibaba has given her, Yahoo’s Mayer might consider sending Yang and Semel some flowers just about now, as well as to Alibaba founder Jack Ma.