This week we saw a lot a few key developments in the tech section, primarily related to Yahoo! (NASDAQ:YHOO) and Google (NASDAQ:GOOG). We analyze a few such developments which could impact their value in the coming years.
Yahoo! announced that it has closed its deal to sell half its stake in Alibaba, which will net the company approximately $4 billion in after tax proceeds. The company will be returning $3 billion in cash to investors from this sale, and will keep the other $1 billion to invest in new projects.
The other half of the Alibaba stake will be monetized via an IPO. After a customary lock-up period, Yahoo! will be able to sell Alibaba shares in the open market. This is good news for Yahoo! since the Alibaba stake has been a touchy subject for investors and has caused a good amount of volatility in the stock. Reduction of half of its stake will help stabilize the company’s value.
We currently have a $19 price estimate for Yahoo!, which stands nearly 20% above its market price.
Google was affected by many news items this week. First, it lost a patent battle with Apple (NASDAQ:AAPL), which will lead to a ban of smartphones that use “overscroll” technology, in Germany. While it will have to start recalling phones and tablets which violate the patent, Google is challenging the patent’s validity in European court. We will be watching this story closely, since a ruling against Google could have implications throughout Europe.
On a more positive front, Google’s social SVP Vic Gundotra announced that Google+ has passed 100 million active users on its site. This is a key metric which shows the increasing popularity of the Google+ platform. Additionally, Mr. Gundotra announced that the company had acquired Nik Software in an effort to improve Google+’s photo offerings.
Lastly, Google signed a deal with Fox to bring shows such as “Family Guy,” “Glee,” and “Modern Family” to Google Play and Youtube.
We currently have a $661 price estimate for Google which stands 10% below its market price.