Yahoo silent on buyout after disappointing results

Yahoo Inc, the subject of much buyout speculation, has announced a disappointed quarterly sales forecast. According to reports last week, a number of private equity firms, including Silver Lake Partners, have been eyeing a buyout expected to be worth around $20 billion. Meanwhile, shares in the company were slightly up, 16 cents higher to $15.65, in extended trading despite the lackluster quarterly financial results.

(Reuters) – Yahoo Inc’s uninspiring quarterly sales forecast disappointed Wall Street and underscored how the one-time Internet leader is struggling to keep up with Google Inc and Facebook.

Investors have pressured Yahoo, the leader in display advertising, and Chief Executive Carol Bartz to deliver growth and revive its stock price, amid talk that private equity firms are exploring a buyout of the $20 billion company.

“She was already on the hotseat. I don’t think she’s off the hotseat. The results have not shown any kind of real improvements,” analyst Yun Kim of Gleacher & Co said of Bartz.

During a conference call with analysts on Tuesday, Bartz defended the company’s progress on her watch, citing improvements to Yahoo’s technology that have made it nimbler, as well as a doubling in operating margins to about 12 percent in the third quarter.

“We’re working to reverse years of decelerating growth,” said Bartz, who joined in 2009 and has since laid off staff and shed various Web businesses.

Bartz did not comment on the private equity talk. Yahoo shares have gained more than 6 percent since reports last week that a variety of private equity firms, including Silver Lake Partners, were exploring a potential buyout of the company — possibly in partnership with the likes of AOL Inc or News Corp.

“It would make sense if they did something with AOL because the business is at the point where it’s a game of scale,” said UBS analyst Brian Pitz.

“Having the largest amount of display advertising … and ability to take out a large amount of costs, could be pretty compelling, but it’s easier said than done. There’s a lot of politics involved and reasons why it wouldn’t happen.”

Sources have said any buyout deal would be contingent upon Yahoo selling its 40 percent stake in China’s Alibaba Group. This would drastically reduce Yahoo’s market value of almost $20 billion now, making a deal more feasible.

But Yahoo has indicated that it is not in any hurry to rid itself of its prized assets.

“To this day no other Internet company outside of China has done as well with their investment in country as we have,” Bartz said.

Shares of Yahoo edged 16 cents higher to $15.65 in extended trading despite the lackluster quarterly financial results.

Kim of Gleacher & Co said Yahoo’s stock may have held steady because many investors didn’t have high expectations for the company. Moreover, the ongoing speculation about a Yahoo buyout or a sale of Yahoo’s Asian assets has buoyed the stock in recent days, she added.
(By Alexei Oreskovic)