Tag Archives: technology

Yahoo Board Nominations Due Soon; Company Prepped For Fire Sale

Yahoo ‘s ( YHOO ) recent writedown of its Tumblr microblog is preparing the company’s core business for sale to private equity firms, possibly at a discount, Rosenblatt Securities said Wednesday. Tumblr revenue did not meet Yahoo’s internal projection for 2015, Rosenblatt analyst Martin Pyykkonen said in a research note. He pointed out that Yahoo’s 2016 guidance for its revenue minus traffic acquisition costs — commissions it pays publishers that run its ads — calls for a nearly 20% decline. “Buyers (with real bids) would have emerged by now if there was strong audience and usage growth to drive advertising demand,” said Pyykkonen, who maintains a sell rating and price target of 30 on Yahoo stock. He said that “Yahoo’s recent writedown of the part of the goodwill on Tumblr is one example of sprucing up the balance sheet for sale of the core business. But we still think it will likely fall short of a premium takeover valuation on Yahoo’s stock.” Yahoo stock was up 0.9% in midday trading in the stock market today , above 33. Yahoo stock has gained 29% since it skidded to a 31-month low of 26.15 last month. But Yahoo stock is down 22% the past 12 months. Yahoo CEO Marissa Mayer is under intensified pressure from major investor Starboard Value, which has urged the exit of Mayer and some directors, as well as the spinoff of Yahoo’s core search business. Yahoo directors are close to offering at least two board seats to the activist hedge fund in order to avert a proxy fight, according to a recent New York Post report. Board member nominations are due by March 26, said Pyykkonen. Dozens of groups are expressing interest in buying the struggling Web portal, say analysts, with Verizon ( VZ ) among those said to be the most likely acquirer. Aside from forming a committee of independent directors to explore possible transactions, Yahoo has announced that it will bring in Goldman Sachs ( GS ), JPMorgan ( JPM ) and PJT Partners ( PJT ) as financial advisors, along with law firm Cravath, Swaine & Moore. Yahoo Faced With Declining Fundamentals Pyykkonen’s report called out the Web company’s “declining fundamentals,” highlighted by drops in users and usage, as well as the Tumblr writedown. Greater revenue concentration from mobile advertising is “benefiting the likes of Facebook ( FB ) and Alphabet ( GOOGL )-owned Google” rather than Yahoo, he said, adding that Netflix ( NFLX ) is also siphoning traffic away from Yahoo. “The fundamental challenge in Yahoo’s core business is the fact that the platform is simply much less relevant to advertisers than it used to be, when it was labeled as a portal, and more recently aggregated content from multiple sources, while producing relatively little of its own unique content,” he said. Comcast ( CMCSA ) is another company rumored to be interested in Yahoo. Verizon has talked up its interest in buying some Yahoo assets “at the right price,” but also said it does not want to “catch a falling knife,” referring to the state of Yahoo’s business. Rumors re-emerged last week that e-commerce giant Alibaba Group ( BABA ) might buy back a 15%  stake that Yahoo now holds in the Chinese company. Yahoo’s Asian assets — comprised of its Alibaba holdings and a 35.5% stake in Yahoo Japan — represent the vast majority of Yahoo’s $31.4 billion market value as of Wednesday. But some observers say such a transaction is unlikely because of high tax implications.

What Now? ServiceNow Confirms BMC Deal Pending; SAP, CRM Rise

Enterprise software developer ServiceNow ( NOW ) advised the Securities and Exchange Commission Wednesday that a federal court in Texas has granted a 30-day stay of all deadlines — notably this Friday’s deadline to start trial — in its defense against patent-violation claim s by BMC Software. ServiceNow and BMC requested the stay “so that the parties may document the agreement and submit appropriate dismissal papers,” ServiceNow said in an 8K filing with the SEC. What now? ServiceNow stock was down 1%, below 60, in early afternoon trade in the stock market today , after rising 3.6% Tuesday as word spread that a legal settlement was in the works. ServiceNow stock still is up for the week and could notch its fourth consecutive week of gains, after shares hit a 22-month low in early February. Shares are still 34% off a record high of 91.28 set Dec. 4. ServiceNow went public in June 2012, priced at 18. More-established rivals Salesforce.com ( CRM ) and SAP ( SAP ) were making their own moves. SAP, the largest in IBD’s Computer Software-Enterprise industry group by market cap, was up a fraction, near 77, Wednesday afternoon, just 5% off a nearly two-year high of 81.21 set Dec. 29. No. 2 player Salesforce.com was up 1.5%, near 71, 14% off a record high of 82.90 set Nov. 19. With a market cap of $9.6 billion, a tenth the size of SAP, ServiceNow is the fifth-largest member of the industry group. Evercore ISI analyst Kirk Materne, in a research note Wednesday, said that the dispute with BMC is “more of a short-term concern … than a wall of worry related to a possible penalty or injunction. “Nevertheless, we believe the (pending) settlement between the two companies does remove a near-term overhang and should allow investors to refocus attention on the longer-term opportunity,” he wrote. “We do not believe that the trial with BMC was impacting sales cycles. … We continue to like the risk/reward longer-term, but as we noted after meeting with the company in early February, NOW is likely to remain in ‘show me’ mode until it reports” its Q1 results. ServiceNow stock crashed 16% on Jan. 28 after the company reported Q4 billings below expectations, though EPS ex items jumped 533% to 19 cents, twice analysts’ expectations, and revenue rose 44% to $285.6 million, also topping Wall Street views. Materne maintained a buy rating on ServiceNow stock, with an 83 price target. Hewlett Packard Enterprise ( HPE ) also has patent infringement claims pending against ServiceNow, filed originally by the former Hewlett-Packard company.      

Good News For Alphabet, Facebook In Ad Spending Budgets, Benefits

Alphabet ( GOOGL ) and Facebook ( FB ) scored big in a survey of advertisers, receiving the highest budget allocations and the best return on investment of digital media properties. The survey of almost 2,000 advertising professionals by RBC Capital Markets had somewhat good news for Twitter ( TWTR ) and LinkedIn ( LNKD ), but not for Yahoo ( YHOO ) or AOL, which was acquired last year by Verizon Communications ( VZ ). Alphabet, via its Google properties, led the pack in the survey that asked advertisers to rank the order of major online-ad platforms based on the return on investment. Facebook and Alphabet’s YouTube followed. Twitter and LinkedIn were next, with Yahoo and AOL last. Twitter was the only platform to see a clear falloff in its relative ROI vs. the prior survey by RBC. When marketers were asked about current spending plans, Google was strongest, followed by Facebook and YouTube, then Twitter and LinkedIn. In terms of ad spend over the next year, 62% of advertisers expect to increase their ad spend on Facebook, while 54% expect to do so with Google, then 32% for Twitter. The trend is quite apparent that ad dollars are moving from TV to online channels, according to the survey. “The trend of pulling ad dollars from television seems to have meaningfully increased,” the RBC report said. The second biggest transfer of ad dollars came from print media. A record 57% of marketers, up from 49% in its previous two surveys, allocate more than 20% of their budgets to online, including a record 23% who allocate over 50% of their budgets to online spending. “We expect online ad spend to continue growing robustly, with a record high 82% of our survey respondents expecting their online marketing budgets to increase over the next year, vs. 16% who expect them to stay the same,” it said. “Clearly, online has become a crucial marketing channel and is continuing to gain importance — a strong secular investment trend, in our view.” Mobile has also become an increasingly important channel, with 73% of marketers allocating some of their online marketing budget to smartphones, vs. 71% in RBC’s previous survey. “We believe mobile will only continue to grow in importance to marketers,” RBC said.