Despite Buyout Anticipation, Yahoo Tries Feeble Attempts at New Products

Since Carol Bartz’s departure, Yahoo (NASDAQ:YHOO) has been for the tech press what Paris Hilton is for TMZ, a constant source of entertainment. The company has been an easy punching bag for critics who slam its management and board for the steady decline in the online advertising sector. Nevertheless, it seems Yahoo wants to reassure its investors and employees that it’s still very much up and running with the company recently unveiling some new features for its Flickr photo service and its recent Facebook alliance. ^[1] Yahoo’s online advertising has struggled in recent years as search giant Google (NASDAQ:GOOG) has gobbled up market share in search and Facebook in display ads.

We have recently launched a revised price estimate of $18 for Yahoo’s stock, which is about 30% above the current market price.

Yahoo is Dawdling with New Announcements

With a new Flickr app for Android and a separate tool for enhanced sharing of Flickr photos, Yahoo is trying hard to ignore its leadership and strategy crisis and act like business can carry on as usual. This announcement comes just days after Yahoo announced an integration of Yahoo News and Facebook.

Yahoo has limited networking or sharing tools at its disposal, and we think integrating with Facebook is a desperate move by Yahoo considering that Facebook is its biggest competitor in the online display advertising market. On the other hand, Yahoo may not have a choice as the time spent by an average user on Yahoo sites dwindles compared to time spent on Facebook, which is rising. As the old saying goes, “If you can’t beat them, join them.” This could be precisely what Yahoo is doing.  ^[2]

Most Important Question: What is Yahoo’s Next Move?

However, it is highly unlikely that these new developments can distract investors from the growing concerns over Yahoo’s fate. It’s too big to ignore and Yahoo still has a respectable footprint as well as valuable assets, especially in Asia.

The growing consensus is that Yahoo might be sold whole or in pieces, especially since the company management has also dropped similar hints perhaps in a move to solicit interest. ^[3] Private equity firm Silver Lake was reportedly looking at buying Yahoo to spin off its Alibaba stake and just recently announced plans to take a stake directly in Alibaba. So while Yahoo’s board might want a sale, finding a buyer may be difficult and so it needs to take steps to right the business.

See our full analysis for Yahoo

1. Wall Street Journal: Yahoo Presses On With New products, Despite Uncertainty [↩]
2. Business Insider: Time spent on Yahoo hits an all-time low [↩]
3. Economic Times: Yahoo’s Internal Memo Reveals a Possible Sale of the Internet Giant [↩]