The endgame for Marissa Mayer at Yahoo is now in sight

Let me think this through.
Let me think this through.
Image: AP Photo/Michel Euler
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Marissa Mayer’s decision to spin off Yahoo’s remaining 15% stake in Alibaba is probably not the end of her dealmaking at the fallen 90s era internet giant. To paraphrase Winston Churchill, it’s not even the beginning of the end. It’s more likely the end of the beginning.

But where as Mayer has been a serial acquirer at Yahoo up until now, buying at least 40 companies since she took the reins in mid-2012, (most of them acqui-hires) there is growing speculation that her next big deal will be from the other side of the negotiating table.

Here’s why.

Once the spinoff is complete, expected by the end of this year, Mayer will be in charge of a much smaller company, one that would be much easier for a potential acquirer to swallow.  Remember, Yahoo’s core business of search, display and mobile advertising is currently, at least in theory, worthless. The company’s market value of around $45 billion, at today’s prices, is worth less than its stakes in Chinese e-commerce colossus Alibaba and Yahoo Japan.

As Nicolas Carlson (who has just written a new book on Mayer’s tenure at Yahoo) points out, this is both good and bad news. The good news, from Mayer’s perspective, is that the bar is set very low, and if she can manage to get core Yahoo growing again, the upside is almost limitless.

The bad news is that Yahoo’s core business still looks very challenged, so achieving this growth will not be easy. And since Yahoo’s stock will collapse after the Alibaba spinoff, she won’t be able to use it as a currency to fund acquisitions to help drive growth.

That’s why Yahoo is now more likely to be prey than predator. So who would be interested in buying it?

The New York Times speculated this morning that private equity firms could be, as well as SoftBank, which already owns 42% of Yahoo Japan. Eric Jackson, a long time shareholder in Yahoo (and vocal critic of Mayer’s) seems to agree.

And of course there is always the scenario of Yahoo and AOL coming together in some shape or form.  Yahoo did not respond to a request for comment.

Of course, it’s also possible that Mayer’s perfectionism would make her determined to engineer a sustainable turnaround at Yahoo. This option would secure her legend status in Silicon Valley. But it would also be a lot riskier. Selling out to someone (at the right price) would make her a hero on Wall Street, and might end up being the easier, and more realistic option.