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With initial bids reportedly due Monday, Yahoo ’s ( YHOO ) revenue and earnings are expected to decline this year, according to a report by tech news site Re/code on Wednesday. Re/code said it based its report on financial information being distributed by Yahoo’s bankers to help possible buyers figure out how much they might bid. Yahoo has reportedly gotten interest from as many as 40 groups who have until Monday to submit preliminary bids for Yahoo’s core business and Asian operations. The book of disclosure documents “shows a company in what has been a serious free fall,” said Re/code, citing sources interviewed. That “has many nervous about bidding.” A Yahoo spokesperson told IBD via email that the company had no comment about the report. Re/code said that, according to the documents, Yahoo estimates that 2016 revenue “is dropping close to 15% and earnings by over 20%. Those revenues, backing out traffic acquisition costs (TAC), are expected to decline from $4.4 billion in 2014 and $4.1 billion in 2015 — already down from previous years — to $3.5 billion in 2016; meanwhile, earnings before depreciation, taxes and amortization are moving from $1.4 billion in 2014 and just below $1 billion in 2015 to $750 million in 2016.” TAC refers to payments that Yahoo makes to other websites to carry its ads. Yahoo expects to have about 9,000 employees at the end of 2016 — down from 12,500 in 2014 and 10,500 in 2015 — while stock-based compensation remains “steady,” Re/code said. That could indicate that “CEO Marissa Mayer is loading up valued employees with outsize share grants to get them to stay,” the report said. Yahoo confirmed last week that Senior Vice President of Talent Acquisition and Development Sandy Gould will become the latest high-profile executive to leave the struggling Internet firm. Yahoo has recently implemented layoffs and begun the process of selling itself and spinning off its hefty stake in China e-commerce giant Alibaba Group ( BABA ), and is also in the midst of a proxy fight seeking to oust its entire board. Yahoo’s revenue growth has stalled for nearly a decade as ad dollars continue to slip away to rivals including Facebook ( FB ), Netflix ( NFLX ), Alphabet ( GOOGL )-subsidiary Google, and others that include high-profile startups Snapchat and Pinterest. Expressions of interest are pouring in from dozens of groups that are eyeing buying the struggling Web portal, with Verizon ( VZ ) rumored to be the most likely acquirer, said Monness Crespi Hardt analyst James Cakmak in an industry research report early last month. Yahoo stock lifted 0.7% in the stock market today , closing at 36.66. Sale or not, Yahoo is facing rough waters. In a letter charging the current board of Yahoo with failing to deliver results for its shareholders, activist investor Starboard Value announced that it wants to sweep out all of the ailing Web company’s nine directors and replace them with its own slate during Yahoo’s 2016 shareholder meeting later this year. The letter — from Starboard Value managing member Jeffrey Smith, one of Starboard’s slate of Yahoo board nominees — indicates that Starboard also doesn’t trust Yahoo’s current directors to perform in terms of either the strategic review of Yahoo’s core search and display-ad business or with the eventual fate of Yahoo’s 15% stake in Alibaba and Yahoo’s holdings in Yahoo Japan. Yahoo’s Asian assets — comprised of its Alibaba holdings and a 35.5% stake in Yahoo Japan — represent the vast majority of Yahoo’s $34.69 billion market value. Yahoo owns a 15% stake in Alibaba, or about 384 million shares. Last month, Monness Crespi estimated the value of Yahoo’s core assets at $3 billion to $4 billion. Alibaba stock closed up 1.8% Wednesday at 78.68. Verizon stock was about flat, closing at 53.52. Scalper1 News
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