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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. Scalper1 News
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