Let’s face it, at this point in Yahoo’s history, very few people are paying attention to its top line, bottom line, or any other sort of line. People just want to know: What’s going to happen to the company?
So when Yahoo reports its first-quarter earnings tomorrow (April 19), investors will be listening closely for any indication of a reverse spinoff—in which Yahoo holds on to its stakes in Alibaba and Yahoo Japan and spins off the rest of the company—or the sale of its core business.
Whether or not that will happen remains to be seen. Investors were hopeful Yahoo would provide some clarity about its future in February, when it reported its fourth quarter earnings. But CEO Marissa Mayer and chief financial officer Ken Goldman basically said that all options remained on the table. The next day, shareholders’ frustration pushed the stock to a 52-week low.
It’s apparent that investors’ patience is running thin, and with a proxy battle on Yahoo’s hands, they’ll need to be convinced the existing board is the right team to lead the company forward.
Here are four questions they’ll want answers to:
For all its troubles, Yahoo remains a very attractive digital property, with its billion monthly users. The company had set a preliminary deadline of April 11 for bids. Judging by press reports, it seems that every major tech and media company has mulled a bid, but most have not signed a nondisclosure agreement that’s required to view Yahoo’s sale book, according to Fortune.
Many have questioned whether Yahoo is seriously committed to looking for a buyer. Some interested parties who requested to meet with Mayer and Goldman have reportedly been directed to prerecorded videos, and the company has also deflected questions about Tumblr’s financials. Yahoo recently wrote down the business by $4.5 billion, essentially admitting it badly overpaid for the blogging site.
When Yahoo last reported its earnings, Mayer said the company was looking into the “responsible monetization of nonstrategic patents.” SunTrust Robinson Humphrey estimates Yahoo’s intellectual property to be worth more than $3 billion if sold together.
But there are doubts Yahoo is willing to sell to the highest bidder. “One keyword in Yahoo’s statement is the word ‘responsible,'” wrote SunTrust’s Bob Peck in an April 13 note. “We think this is indicative of management’s lack of desire to sell the patents to a ‘non-practicing entity,’ colloquially known as a ‘patent troll.’ This could limit Yahoo maximizing the patents’ open market values, if true.”
Last month, activist investor Starboard Value formally waged a proxy battle to replace Yahoo’s entire board of directors. In the remaining time leading up to Yahoo’s annual shareholder meeting on June 24, both parties are canvassing investors to support their sides. Given the ride Yahoo’s taken investors on over the last year—the promise to return shareholder value by spinning off its Alibaba stake, the potential tax obligation from the spinoff, the decision to pursue a reverse spinoff, and finally the exploration of a sale—Yahoo’s going to have to make one hell of a case.
So far, investors, including some who’ve spoken with Quartz, are convinced a sale is the most likely of all options. In anticipation of a sale, Yahoo filed an 8-K on April 10 revealing changes that allow terminated employees to receive their severance package if they are laid off, even if only part of the business is sold.
“Given the launch of a strategic review process, a new proxy fight through which an entirely new Board has been nominated, and an upcoming deadline for bids on the core business, we doubt the company has had much time or energy to devote to core operations, much less a turnaround,” Barclay’s Paul Vogel wrote in an April 15 note.