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Yahoo Sets Panel To Seek Deals; Verizon Says No To ‘Falling Knife’

Yahoo ’s ( YHOO ) board on Friday formed a committee of independent directors to entertain offers for its core Internet business, if they come. One of the prospective buyers , Verizon Communications ( VZ ), this week said it does not want to “catch a falling knife,” referring to the state of Yahoo’s business. Private equity firms are said to be interested in Yahoo, but IAC/InterActiveCorp ( IAC ) has signaled it’s not in the running. Aside from forming a committee of independent directors to explore possible transactions, Yahoo on Friday announced that it will bring in Goldman Sachs, JPMorgan and PJT Partners as financial advisors, along with law firm Cravath, Swaine & Moore. Yahoo stock was up 2.5% in midday trading in the stock market today , near 30. Bloomberg reported earlier this week that activist investor Starboard Value, which has been pushing for changes, could wage a proxy fight at Yahoo. Yahoo dropped plans last year to spin off its stake in Alibaba Group ( BABA ). Executives have said they might create a separate company that would house Yahoo’s Internet business and its stake in Yahoo Japan, but a lot of options appear to be on the board for the struggling Internet company. Verizon has talked up its interest in buying some Yahoo assets “at the right price.” Verizon last June acquired AOL for $4.4 billion, including about $300 million in AOL debt. AOL’s Internet business had been improving, while Yahoo’s display advertising growth has slowed, but Yahoo has been focusing on mobile and other growth areas. UBS telecom analyst John Hodulik, in a research report Thursday, said Verizon seems in no rush, based on a meeting with AOL’s chief executive, Tim Armstrong. Armstrong told UBS that Verizon would need more information on the state of Yahoo’s business under due diligence, according to Hodulik’s report. “They’d have to start a process, share all the data regarding audience, distribution, monetization and talent,” Armstrong told UBS. “Everything at this point is theoretical. Assets with rapidly a growing number of users are very expensive. Even those with a stable number of users are expensive. That said, you don’t want to catch a falling knife. Hard to know until we get a look.”

Mayer Touts Yahoo’s Mobile Growth At Developers Conference

SAN FRANCISCO — Amid a generally falling stock and an uncertain future, Yahoo ( YHOO ) opened its mobile developers conference in San Francisco on Thursday with a keynote by CEO Marissa Mayer that avoided addressing the company’s troubled state of affairs . Speaking to several hundred developers of mobile apps — the balconies at the historic Masonic venue were empty — she kicked off the daylong affair with an optimistic tone, a day after the company’s latest round of layoffs. “We’re continuing to invest in tools that will help developers build great apps, reach new audiences and grow into great businesses,” Mayer said in the prepared speech. “Today we’re pleased to announce that we have passed 800,000 applications. That means we’ve had almost 500 applications added each day of the past year.” Mobile has been a Yahoo focus since Mayer came aboard as the heralded new CEO in 2012, recruited away from a top role at Google, which is now a unit of Alphabet ( GOOGL ). On Wednesday, tech news website Re/code reported that the company had designated it as the day of the week to implement the job cuts that the company announced would be coming early this month, when it said it was mulling its strategic options. The company has said it plans to lay off 15% of its workforce, cutting about 1,600 jobs . Mayer reportedly intends to spread the layoffs over several Wednesdays. One Yahoo employee told the New York Times that it was “kind of a blood bath” at Yahoo’s offices. “Only a handful of people are staying,” the employee, who requested anonymity, told the Times. Yahoo stock edged up a fraction Thursday, to 29.42. Shares last week touched a 31-month low of 26.15. In her speech, Mayer touted the $1 billion annual revenue being brought in by apps developed on Yahoo’s mobile ad and analytics property, called Flurry. “We want you to know that you’re in the right place,” Mayer said. Yahoo Touts ‘Long-Tail’ Mobile Apps Mayer also told developers that, though mobile growth in general is “plateauing,” developers should focus on capturing more of the time that people spend on mobile devices. “At Yahoo, we believe that the mobile industry is going to be defined by many players, not just a handful,” she said, adding that long-tail apps — designed for less common tasks such as a virtual dressing room — are growing far more quickly than those designed for common tasks such as email or instant messaging. Simon Khalaf, Yahoo vice president of publishing products, also warned that mobile is a maturing industry, which some took to mean that 2016 might see a slowdown. “Mobile is growing so fast,” Khalaf said in his prepared remarks, following Mayer’s. “There was a phenomenal growth year, but growth rates are declining. Wall Street thinks that hardware is on the decline due to saturation, but there’s more opportunity in software. It’s the sign of a maturing industry.” Mayer spoke for just over 10 minutes, though she was scheduled to talk for 25 minutes. At last year’s conference, she took questions from reporters, but this year Yahoo declined to make her available, substituting Khalaf instead. Mobile has been a significant focus for Mayer, part of what the company calls its “MaVeNS” strategy — focusing on the growth areas of mobile, video, native ads and social. Yahoo has spent hundreds of millions of dollars to acquire firms such as Flurry and BrightRoll. The company reported 45% growth in its MaVeNS revenue in 2015 and 26% year-over-year growth in Q4, compared with 8% and 2% growth for the company overall. Mobile represented about 20% of Yahoo’s revenue last year. The embattled CEO has also made big bets on its media properties — bets that did not pay off, as Yahoo on Wednesday said it’s shutting down several of its online magazines, such as food and travel. It plans to reduce the size of its tech reporting staff and eventually fold it into Yahoo News . Yahoo’s revenue growth has now stalled for nearly a decade. Advertising dollars continue to slip away to rivals such as Facebook ( FB ), Netflix ( NFLX ), Google and others. Yahoo’s Q1 2016 guidance disappointed analysts. Nomura analyst Anthony DiClemente said that it implies that net revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) will decline by 19% and 53%, respectively. Nomura lowered its price target on Yahoo stock to 34 from 40, citing changes in the valuation of Yahoo’s stake in Chinese e-commerce giant Alibaba Group ( BABA ). Yahoo executives forecast modest revenue growth acceleration in 2017 and 2018.

China’s Q4 Earnings Season Resumes With NetEase, Baidu, JD

The state of China’s wobbly economy will come into focus next week when a pair of big Chinese Internet companies are set to report fourth-quarter earnings. First up to bat is NetEase ( NTES ), a home-field favorite on China’s gaming scene. It ranks a close second in gaming to Tencent Holdings ( TCEHY ), which reports earnings next month. Also coming next week is China search engine leader Baidu ( BIDU ), followed by e-commerce company JD.com ( JD ) on March 1. NetEase is set to report after the close Wednesday. The company topped earnings expectations when it post Q3 earnings Nov. 11, sending its stock to a then record high of 159.34, as revenue rose 114% in local currency, year over year. The stock continued upward and hit an all-time high of 186.45 on Dec. 29. NetEase has pulled back and closed Thursday near 152. The Q4 consensus estimate on NetEase is for sales to rise 121% in local currency to $1.17 billion. Earnings per share minus items are seen rising 52% in local currency, to $2.25. Analysts will look at the state of new mobile games in the pipeline. In late December, NetEase unveiled 26 new mobile and PC games. Baidu is set to report after the close Thursday, with analysts looking for guidance on China’s ad market amid an economic slowdown. Baidu stock jumped 11% to 197.47 when it reported Q3 earnings on Oct. 30 that were in line with estimates. Revenue rose 36% in local currency. Analysts expect Q4 revenue will rise 32% in local currency, to $2.85 billion. EPS minus items is seen falling 27%, to $1.01. Last week, Baidu announced that it had received a non-binding proposal from two Baidu executives to acquire the company’s fast-growing Qiyi video wing for $2.8 billion. Baidu stock hit a seven-month high of 217.97 on Nov. 30 but closed Thursday near 161. JD.com is slated to report Q4 earnings before the market open on March 1. The focus is expected to be on JD’s push into online-to-offline (O2O) retailing and other new businesses. JD is banking on its O2O business to help it compete in China’s burgeoning e-commerce arena vs. China e-commerce leader Alibaba ( BABA ) and others. Analysts expect sales to rise 50% in local currency to $7.96 billion. They see the company swinging to a two-cent per-share loss from a penny profit in the year-earlier period. Tencent, China’s leader in messaging and gaming, is set to report earnings before the market open March 17. It’s traded in the U.S. over the counter. Tencent, Alibaba, JD and Baidu are the four largest Internet companies in China. On Jan. 28, Alibaba reported earnings for its fiscal third quarter, ended Dec. 31, that topped Wall Street expectations.