Tag Archives: yhoo

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.

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.

Frontier Downgraded By Citi On Post-Verizon-Deal Synergies

Citigroup downgraded Frontier Communications ( FTR ) saying synergies expected from its acquisition of residential lines in three states from Verizon Communications ( VZ ) may fall short of consensus estimates. Verizon’s sale of wireline assets in California, Florida and Texas for $10.5 billion to Frontier is expected to close by March 31. Verizon, No. 4 on the latest IBD Big Cap 20 list of top-performing big-cap stocks, is aiming to strengthen its balance sheet ahead of an auction of radio spectrum controlled by local TV stations, which is slated to begin this month. Verizon, which acquired AOL last year for $4.4 billion, also has stated interest in acquiring parts of Yahoo ’s ( YHOO ) Internet business. Citigroup analyst Michael Rollins on Wednesday lowered his rating on Frontier to sell from neutral. “We are lowering our pro-forma OIBDA (operating income before interest tax, depreciation and amortization) outlook for Frontier,” wrote Rollins. “Our study of the company’s last two acquisitions suggests net synergy realization is much lower than the guided gross synergy figures. We do not think the emerging consensus is discounting the guided synergy contributions enough.” Frontier stock was up 21% in 2016 through Tuesday, though it has a mediocre IBD composite rating of 68. But shares were down more than 5%, near 5.30, in early trading in the stock market today . AT&T ( T ), No. 2 on the IBD Big Cap  20 and an IBD Leaderboard stock, is the highest-rated phone company in IBD’s Telecom Services-Integrated group. AT&T’s cash flow has been bolstered by its acquisition of satellite TV broadcaster DirecTV. Frontier will assume $600 million in debt as part of the deal Verizon deal, involving former GTE assets in California, Florida and Texas. In 2010, Verizon sold Frontier 4 million phone lines in 14 states for $5.3 billion. Frontier in 2013 acquired AT&T’s wireline assets in Connecticut for $2 billion in cash. Both AT&T and Verizon have been shedding residential lines as well as noncore assets such as cellphone towers. Verizon stock was up a fraction in early trading Wednesday, near 53 and within range of a 51.30 buy point first touched Feb. 25. Image provided by Shutterstock.