A bit risky to be short Yahoo (YHOO) right now

By: ispeculatornew
Date posted: 03.04.2011 (5:00 am) | Write a Comment  (0 Comments)

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I’m a very public Yahoo “hater”, not the website itself necessarily, but the company in general, how it operates and its progress in recent years. I have often put Aol (AOL), IAC Interactive (IACI) and Yahoo together (I am short on all 3 names right now!) and named them the internet content companies. Recently, I have been much more positive about AOL but have not been anywhere close to backing down on Yahoo even saying that you’d be crazy to own Yahoo.

I did read two interesting pieces about Yahoo, the first one which you can read here is about what happens when Yahoo acquires a company. It includes a short history of more recent Yahoo acquisitions and what happened to them since then. To give you a summary, Yahoo is closing out several of them right now. So paying millions of dollars only to shut things down later? It’s not what I’d call impressive although in some cases, especially smaller ones, I do understand that the whole purpose of the acquisition is getting access to key technology or employees & the founder. There is no excuse for recent decisions to close Delicious & MyBlogLog among others.

The other piece was about investors discounting the value of Yahoo’s Asian assets such as Yahoo Japan, Alibaba, Taobao & Alipay. These companies are rarely discussed in Yahoo’s statements and even less in its earning calls. Why? There are several reasons but the two main ones I think are that these assets are ran independently of Yahoo in every sense. In fact, a recent US visit by Alibaba’s CEO made the news because he visited many Silicon Valley executives but opted to not meet Carol Bartz, the Yahoo CEO. Not shocking but it still gives a decent idea of how things are. The second reason is that these divisions being managed outside of Yahoo’s realm are the best performers (by far) in Yahoo which does not look so great for Miss Bartz and her team.

It’s a bit difficult to correctly value these assets for me but the increasingly public rumors that Yahoo is getting ready to sell off some of these stakes (such as recent rumors of its selling its Yahoo Japan stake for $8 billion). should worry those who are short on Yahoo, including myself. I am keeping the position for now but will be monitoring it very carefully. The possibility that Yahoo is worth much less than the sum of its parts means that selling some of the assets would make that fact even more obvious (if sold at the right price obviously, but Bartz can’t possibly screw this up also can she?).

Disclosure: I am currently short Yahoo (YHOO), short AOL (AOL) and short IAC Interactive (IACI).

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