Yahoo bidders push ahead despite souring finances

In this Feb. 19, 2015, file photo, Yahoo President and CEO Marissa Mayer delivers the keynote address at the first-ever Yahoo Mobile Developer's Conference, which took place in San Francisco.

SAN FRANCISCO — Prospective buyers of Yahoo’s Web assets have not been dissuaded by a new and sobering look at the company’s souring financials.

Verizon Communications Inc. Plans to make a bid for Yahoo’s Internet business next week, Bloomberg News reported. The telecom giant is willing to acquire the company’s Yahoo Japan Corp. Stake as part of the deal, Bloomberg said, citing people familiar with the matter.

Google, the main division of Alphabet Inc., Is also considering bidding for Yahoo’s core Web businesses, which include Yahoo Mail, Bloomberg reported.

Shares of Yahoo (YHOO) jumped on the news, but quickly fell back down to earth, ending down 1.3% to $36.17 a share.

Verizon, which bought AOL, Yahoo’s smaller competitor, for $4.4 billion last year, declined to comment. Google also declined to comment.

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News of eager bidders come despite a disappointing “sale book” Yahoo bankers are showing to potential bidders that portrays a deeply flawed company with plunging revenue and imminent layoffs, according to a person with access to the book.

The book shows that the troubled Silicon Valley icon estimates 2016 revenue will fall about 15% and earnings by more than 20%. Yahoo expects its workforce to decline to about 9,000 by the end of 2016, down from 10,500 last year and 12,500 in 2014, said the person, who asked not to be identified because of the sensitive nature of the talks.

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Despite the daunting numbers, Yahoo is likely to fetch a decent price in the billions if Verizon drives up the price, said the person who confirmed the sale book numbers to USA TODAY.

Yahoo, which declined to comment, has made no secret of its distressed financial state. The company’s declining revenue and workforce guidance surfaced during its earnings call in February.

Yahoo is putting its assets up for sale, with a bidding deadline of April 11, amid a shareholder revolt led by activist hedge fund shop Starboard Value, which has threatened to overthrow the board of directors and replace CEO Marissa Mayer.

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Even if Yahoo were to announce a sale of assets at a strong price in the coming months, Starboard CEO Jeff Smith intends to follow through with his recently announced plan to overhaul the board, according to two sources with direct knowledge of the hedge fund manager’s thinking. That is because Smith, who has ousted entire boards before, doesn’t trust Yahoo’s current leadership to pursue a sale of assets until the bitter end, said these people, who were not authorized to speak on the record.

One exception would be if Yahoo were to close on a sale before the next annual shareholder meeting. But that is unlikely as Delaware law, where Yahoo is incorporated, requires companies to hold their annual meetings within 13 months of the last meeting. That timeline gives Yahoo until the third week of July, or just four months, to either close on a sale or face a contested director election.

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Starboard has been pushing Yahoo’s board to sell off its core assets after it gave up on plans to unlock value for shareholders through a tax-free spin-off of its stake in Chinese e-commerce company Alibaba. Selling its core Internet assets has been pushed as an alternate way to unlock value for shareholders, who argue that the company’s value is being overshadowed by its $29 billion stake in Alibaba.

Alibaba, AT&T, SoftBank, Verizon and Time Inc. Have been mentioned as possible bidders. Microsoft is said to also be interested in helping finance a potential sale to preserve a search partnership it has with Yahoo and not cede ground to rival Google.

Kaja Whitehouse reported from New York, Jon Swartz from San Francisco.

Contributing: Brett Molina and Edward C. Baig in New York.

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