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Summary:

Silicon Valley is abuzz with rumors of Yahoo and its private equity buyers. And there are many. Whatever comes of these moves, the questions are, can Yahoo be saved? What is the value that can be retrieved? And will it become Waterloo for the P/E folks?

yahoo billboard

Last night a source of mine sent me a text message about spotting Jerry Yang and David Filo (in a suit) at Palo Alto’s Four Seasons Hotel in company of some serious looking men, who spend a lot of time (and money) appearing to be self-important, a skill they perhaps learn in business school. His pithy message to sum it all up — looks like it is all going down.

The “it” is Yahoo’s very public auction of itself to the highest private equity bidder. In case you were hiding under a rock, here is a recap of rumors around Yahoo’s possible sale:

  • Silver Lake Partners wants to buy a minority stake in Yahoo for about $16.60 a share (valuing Yahoo at $20.6 billion or about 6 percent higher than yesterday’s closing price.) Silver Lake is working with Microsoft and Andreessen Horowitz.
  • The transaction is going to use PIPEs, private investment in public equity — a type of transaction long reserved for somewhat dubious companies.
  • Jerry Yang will stay on the board, but the investors will get three seats on the board, reports say.
  • Some folks believe that Jeff Jordan, former CEO of OpenTable, will become the chief executive of Yahoo and VC Marc Andreessen will become the chairman.
  • TPG Capital is considering offering a $1 per share more — aka $17.60/share.
  • Others are also eyeing the company including KKR and Blackstone Group.
  • Thomas H. Lee Partners is thinking about a bid.
  • Alibaba Group wants to buy Yahoo. Yahoo owns 40 percent of the Chinese company. Kara Swisher says they are thinking about teaming up with Softbank and Blackstone for their own bid.

600 million

Last time I wrote about Yahoo and its dismal and disastrous board of directors, I pointed out that 600 million users make up Yahoo’s biggest asset (and biggest stumbling block) and that company needed to clean house and then go shopping. Most of the people in comments disagreed and said that no self-respecting startup would want to be part of Yahoo.

Instead, most felt that the company should clean house and focus on a few pockets of growth inside the company — communications and shopping for example. I am betting buyers will be thinking along those lines, but will that be enough?

Whatever comes of these moves, the question is, can Yahoo be saved, and if yes, what is the value that can be retrieved? More importantly, will these private equity investors meet their own tech Waterloo in the fallen Internet star?

Dead Fish

As far as I am concerned, Yahoo is pretty far gone and is essentially a hollow shell of its former self. Its board — probably the single worst group in business — has managed to drip every last drop out of its body. There are few bright spots — Flickr, Yahoo Mail and Yahoo Shopping — but they cannot make up for the singular reality that the Internet that helped Yahoo thrive is no longer the Internet most people use.

Behavioral shifts in the Internet are so strong that Yahoo has no chance. The average U.S. Facebook user is spending over six hours a month day on the social network, Twitter is becoming the new news network and photos are thriving on mobile platforms.

The Internet of today is one of many screens. Yahoo, despite its mobile products and wonderful experiments with Yahoo TV, is still a one trick pony — online advertising.  More accurately, the classic CPM-style advertising depends on large audiences, lots of page views and well, you get it, an old-fashioned way of thinking. When I think of Yahoo, I am reminded of a salmon farmed on carcinogens that is trying to move upstream in order to find growth.

Smart guys, but…

The consortium that is making a push for Yahoo is the same group that went out and bought Skype from eBay and turned around and flipped it to Microsoft, and in the process they made a lot of money.

However, this is not the same case. Skype was and still is on the right side of history. Usage behavior favors Skype, which continues to grow despite the company having ruined a great user experience. Skype is thriving despite all the meddling from the previous owners. Microsoft can’t do anything because Skype provides value.

What does Yahoo do that you and I can’t live without?

That’s right … nothing!

I have a lot of respect for Jeff Jordan (who would actually be one of my choices to run Yahoo), but I am sorry even he cannot do the impossible. Yahoo’s brain drain is legendary and it continues. There are more resumes going out of Yahoo than there are folks lining up to work for Yahoo.  Unless there is a tech/broad economy collapse, that situation isn’t going to change.

Frankly, if you were a smart engineer or a product guy, why would you go work for a company, which is going to be owned by buyout guys who essentially nickel-and-dime your creativity to death? Why not go and work for a startup, where the chances of an upside, however remote they might be, are still there.

Or better yet, take a flyer and start your own company. Hell, if you need a job, these days even Google is pretty lax about hiring. The fact is that the buyout philosophy might work on old industrial-age companies, but I am not sure it would translate to Internet companies.

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  10. Peter Alexandrov Wednesday, November 30, 2011

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  12. Will Yahoo turn out to be an egg on its buyer’s face?: Last night a source of mine sent me a text me… http://t.co/kuWl67HX Via. GigaOM

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  20. Yasbella Sebastian Wednesday, November 30, 2011

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  22. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/JaVk5oJT

  23. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/WoXM1qyp via Om Malik

  24. RT @gigaom: Will #Yahoo turn out to be an egg on its buyer’s face? http://t.co/YNYt3J5E

  25. gigaom: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/ALRMXGP9

  26. Midlands Consulting Wednesday, November 30, 2011

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  27. OM Says http://t.co/KMvNqxln. Buy-out middlemen to take control of Yahoo? Anderseen to be chairman?

  28. RT @gigaom: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/9kuXxdNN

  29. Yahoos very public auction http://t.co/JiyRpR04 #in #fb #yahoo #Internet #business

  30. [DocDocc] Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/iXxyj61e via gigaOM

  31. Will Yahoo turn out to be an egg on its buyer’s face?: Silicon Valley is abuzz with rumors of Yahoo and its priv… http://t.co/dOOH1sIp

  32. Yahoo will be a disaster for any buyer? http://t.co/5WLm77Dl via @GigaOm

  33. Dillon Ferdinandi Wednesday, November 30, 2011

    GigaOM – Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/0N8n9swc $$

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  40. The Forbidden Matrix Wednesday, November 30, 2011

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  43. RT @InfoGuruShop: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/i6NQcRqL #in

  44. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/hWwffcmv

  45. RT @om: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/ltRngdSa

  46. RT @om: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/ltRngdSa

  47. Subhasis Chakraborty Wednesday, November 30, 2011

    Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/XaUa6tgS #technology

  48. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/LXhSbEs7

  49. Great summary on the $YHOO auction RT: @gigaom: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/3lL6rctO”

  50. Will Yahoo turn out to be an egg on its buyer’s face?: More importantly, will these private equity investors mee… http://t.co/wsAd3kki

  51. I’ll bet it does: @om Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/tFJMaova

  52. “The average U.S. Facebook user is spending over six hours a day on the social network…”

    As if that stat equals a fully engaged user with fingers constantly tapping on the keyboard and eyes glued to the screen. Nice stat though for the IPO dog and pony show.

    Yahoo has one asset – Mail.

    1. Sally

      Yes on Yahoo Mail and equally vehement yes on your characterization of 6-hour stat as a stalking horse for IPO. But it is also not wrong and shows how much it dominates our online lives.

  53. RT @gigaom: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/DjqgKoqo

  54. RT @greggretsch: I’ll bet it does: @om Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/tFJMaova

  55. Will Yahoo turn out to be an egg on its buyer’s face?: Last night a source of mine sent me a text message about … http://t.co/XfUtEFwu

  56. Mohammed Maqsoud Wednesday, November 30, 2011

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  57. Data Center Blogs Wednesday, November 30, 2011

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  58. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/C0qeiXzW

  59. Will Yahoo turn out to be an egg on its buyer’s face? – Silicon Valley is abuzz with rumors of Yahoo and its private… http://t.co/GONd0o1D

  60. Will Yahoo turn out to be an egg on its buyer’s face? – Silicon Valley is abuzz with rumors of Yahoo and its private… http://t.co/Y48Hp8kY

  61. If you don’t already have a case of #YahooFatigue, here’s a sound summary on the $YHOO auction by @om –> http://t.co/cMwtRHwb

  62. If you don’t already have a case of #YahooFatigue, here’s a sound summary of the $YHOO auction by @om –> http://t.co/5obNwJMc

  63. Sad but true- Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/LdrPwohx

  64. RT @webmktrsspk: Will Yahoo turn out to be an egg on its buyer’s face? (Giga OM): – http://t.co/cT4oXC4F

  65. RT @webmktrsspk: Will Yahoo turn out to be an egg on its buyer’s face? (Giga OM): – http://t.co/ZOUM7Q5w

  66. Will Yahoo turn out to be an egg on its buyer’s face? (@om / GigaOM) http://t.co/6jekAoEq http://t.co/AMWH7dmr

  67. Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  68. Mean. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/C1rXyyY6

  69. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  70. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/IyhJuBF5

  71. “@karaswisher: Shares powerful Yahoo buyout summary by Om Malik http://t.co/AWzSwIR6”

  72. Well-written article Om, thank you.

  73. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  74. I think Om meant to say six hours a month on FaceBook, not six hours a day. Source: http://blog.nielsen.com/nielsenwire/online_mobile/september-2011-top-us-web-brands/

    1. Kate,

      Thanks for the correction and letting me know. Sorry about the error.

  75. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/tD8569F4

  76. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/0G6OJchf

  77. Christopher Allen Wednesday, November 30, 2011

    RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  78. BuzzRank Curator Wednesday, November 30, 2011

    Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/VaFqXBtV http://t.co/ZiZuZRJx

  79. great @Om article http://t.co/vk5bHabV but @yahoo ‘s best asset is not just 600mm PC users, rather unique profiles that span PC and #mobile

  80. Weird.. Mail? That’s all Yahoo has? Last I checked, Yahoo leads the web in a lot of different properties.. like finance.yahoo.com, autos.yahoo.com, omg.yahoo.com and 10 others..

  81. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  82. Yahoo is a bunch of chicken parts that have such severe freezer burn that the premise that anyone can re-assemble them into a living, breathing chicken is well into the realm of science fiction.

  83. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/lcMssmar

  84. I respect JJ a lot; but he’s no product guru and without true product leadership and innovation I don’t know how they can reanimate dead tissue.

    1. I agree with the articles sentiment; I just don’t see anything in Yahoo, saving it buy acquisitions makes no sense if the core asset is worthless, you could essentially just start a new company at that point. Only the alibaba stake is valuable, beyond that I’d hope microsoft would bail the company out. The big mistake was not pursuing carl icahns deal in 08. Jerry Yang is an idiot.

      1. depends on your definition of “core asset”. Take a look at Y! Sports(#1 sports site and fantasy sports). You can spin that off into a company and it will be more successful and easier than starting a new company as you suggested.
        I’m guessing a lot of buyers would be interested in purchasing Y! sports

  85. ✔ Verified sdhdfw Wednesday, November 30, 2011

    Will Yahoo turn out to be an egg on its buyer’s face? — Tech News and Analysis – http://t.co/7KIymJgu

  86. .@om calls it straight on Yahoo. http://t.co/HXaFXblX

  87. Om nails the self-reinforcement of the self-important: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/OeR78h4Q

  88. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/BMFZy1I3

  89. RT @gigaom: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/DjqgKoqo

  90. RT @gigaom: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/DjqgKoqo

  91. .@Om nails Yahoo crux: http://t.co/U0DPhUQC > Brand can’t be revived. Someone hopefully has a creative idea? Otherwise, $15B+ is too high.

  92. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/CwqTimXg

  93. Tara Suan Kirchner Wednesday, November 30, 2011

    Still bleeding pink and blue. Flickr, the bright light. http://t.co/nNu8c7vT

  94. Well thought out “@om: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/rM6wegmA #in

  95. RT @semil: .@Om nails Yahoo crux: http://t.co/U0DPhUQC > Brand can’t be revived. Someone hopefully has a creative idea? Otherwise, $15B+ is too high.

  96. Will Yahoo turn out to be an egg on its buyer’s face?
    http://t.co/h9GaVMsG

  97. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/vQm1NS87

  98. Will Yahoo turn out to be an egg on its buyer’s face? — Tech News and Analysis http://t.co/Fe7iQtEA (via Instapaper)

  99. Will Yahoo turn out to be an egg on its buyer’s face? — likely http://t.co/7OCimtvj

  100. RT @jeffnolan: Will Yahoo turn out to be an egg on its buyer’s face? — likely http://t.co/2JFrTTHZ

  101. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/dmZbIJ4Y

  102. worth a read: @gigaom with a (#yahoo) killer post today in “OM Says”: http://t.co/56EjWsvx (via @om)

  103. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/vAo4qhIx

  104. Will Yahoo turn out to be an egg on its buyer’s face?: Last night a source of mine sent me a text me… http://t.co/h8hxPAGo via @gigaom

  105. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  106. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/TxM6GBp6

  107. Jonas de los Reyes Wednesday, November 30, 2011

    RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  108. Agree with Om on the monetization and talent problems. But I am also surprised how narrow minded he is. Y! properties like frontpage, news, sports and finance still get huge traffic and are tops in their fields. Y! sports is doing very well especially with their Fantasy Football (#1 by far).
    Techies don’t represent everyone. Sure, Y! has fallen behind Facebook and Google in visitors and time spent but at #3 they still have a ton of users.
    The potential buyers get it and that is why they’re willing to throw down so much $.

    1. Its amazing how techies call something as useless as foursquare a next big thing valueing in billions of dollars and something as yahoo ‘a pretty far gone thing’

  109. Good article, and spot on. Totally disagree about hiring at Google though, it’s still a tough gauntlet you need to get through — I’ve worked at both Yahoo and now work at Google :)

  110. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/QuuNEsWq

  111. Social Media Today Wednesday, November 30, 2011

    I totally agree with: OM Says http://t.co/SPCDIOcN via @om

  112. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/D1XHD3MB

  113. Yahoo:Internet as Palm:Mobile…5th wheels. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/iyDeOdRL #yam

  114. Yahoo:Internet as Palm:Mobile…5th wheels.

    1. Really?- wow, I actually didn’t realize that their sports section or any others were so dominant, I suppose that’s some value, though personally I don’t really know what you’d do with those, then again Silverlake is essentially offering no premium. I believe that the end result is a sale to Microsoft, as apparently a PIPE assists that from a tax perspective. Agree with Elvirs on foursquare.

  115. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  116. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/1ViR69tI

  117. Om Malik’s assessment of Yahoo: http://t.co/mItQUYcN

  118. RT @karaswisher : Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/aLbAdB0z

  119. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/jQJkFbu1

  120. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/l6UeJBMD

  121. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/6Ovq1yb7

  122. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/dPU4NQOG #yahoo #gigaom #tech #search

  123. Alibaba could salvage value from Yahoo. They could expose manufacturers more directly to US consumers, circumventing the mess of eBay brokers.

    The other entities would indeed be buying a shell, and would likely resell 5 years later for a tenth of what they pay.

  124. Will Yahoo turn out to be an egg on its buyer’s face?: Last night a source of mine sent me a text messag… http://t.co/VUa1CSuK #gigaom

  125. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/4FVLYkFN

  126. Some good advice for Yahoo employees and investors. RT @gigaom: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/gQVuhyam

  127. Georgia Sapounas Wednesday, November 30, 2011

    Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/VX22JRz9

  128. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/VfRqNp7H

  129. sarah ellen ross Wednesday, November 30, 2011

    RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  130. Will Yahoo turn out to be an egg on its buyer’s face? — Tech News and Analysis http://t.co/BJw66fzs

  131. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/n9tjfsQj

  132. RT @karaswisher: Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/HTKrawn2

  133. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/MrmIRISd <– this @om at his best

  134. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/iLnEcZEs

  135. TheGlobalDigital.com Wednesday, November 30, 2011

    I really enjoyed this enlightening article, Well done !
    The Global Digital

  136. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/MKmVlwzs

  137. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/IwdDT1Vr

  138. Binoy xavier joy Wednesday, November 30, 2011

    Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/4PEYIwrq

  139. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/TJmfeqab

  140. @OM Says: Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/wFVNfXUN

  141. ulma n. haryanto Wednesday, November 30, 2011

    RT @nxthompson: “When I think of Yahoo, I am reminded of a salmon farmed on carcinogens ” @om http://t.co/7cmol20C

  142. Tom Hillenbrand Thursday, December 1, 2011

    What does Yahoo do that you and I can’t live without? http://t.co/C2pIUOv5

  143. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/upnQjaUR

  144. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/ncTEZlqw

  145. “The fact is that the buyout philosophy might work on old industrial-age companies, but I am not sure it would translate to Internet companies.” Nail banged squarely on the head.

  146. Abhijeet Mukherjee Thursday, December 1, 2011

    Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/2fc8ZkZG

  147. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/3sknjEaB – RT @om: 4 @mvivio @steube @JamieK

  148. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/nhngHuyw

  149. C’mon, the Palo Alto Four Seasons? Jerry Yang has given up on subtlety http://t.co/xYvZUIFs

  150. Yahoo reminds @om of “salmon farmed on carcinogens” http://t.co/3fizKJqv

  151. Throwing around useless statistics about time spent that are out of context in terms of the user experience is ridiculous. Yahoo! is a company that could be poised once again for growth. It still has over 700MM global users and growing, top web properties in 10 vertical categories, a search business that has largely been ignored (which is the true hidden value at Yahoo!), super strong relationships with advertisers and lastly the opportunity to diversify its monetization strategy to drive incremental growth. Last I checked Facebooks growth is starting to level off and their revenues are half of Yahoo!’s. Yet, they deserve a 100 billion valuation? The Valley has lost all grip with reality and investors are starting to believe their own nonsense. There is still big value to be unlocked at Yahoo!, they just need to get out of their own way.

    One point I do however agree with is that there is a brain drain. This isnt because Yahoo! isnt a viable company but rather the executive team would prefer to hire people that make them look good in lieu of hiring the best players they can possibly find and in some cases doing whatever you need to do in order to win. AKA overpaying product and engineering talent.

  152. Yahoo reminds Om Malik of  “salmon farmed on carcinogens”  http://t.co/Afj6dG9B

  153. Om nails it. Will Yahoo turn out to be an egg on its buyer’s face? ➛http://t.co/miQ6Xitz /via @karaswisher

  154. Good points from Om Malik – “Will Yahoo turn out to be an egg on its buyer’s face?” http://t.co/QQyfkxzJ

  155. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/4DmOHQrP

  156. Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/e0YC52IA

  157. hussein kanji Friday, December 2, 2011

    Recap of all the Yahoo dealmaking via @gigaom http://t.co/9qpO7SnB

  158. Brad Liebmann Friday, December 2, 2011

    RT @hkanji: Recap of all the #Yahoo dealmaking via @gigaom http://t.co/5MX4F6AL

  159. Charles Costa Sunday, December 4, 2011

    Will Yahoo turn out to be an egg on its buyer’s face? http://t.co/zWSjPbuw – Yes it will. @Yahoo Just give up and pull the plug!

  160. At the price proposed nothing new needs to happen. Even if Yahoo US continues its decline into oblivion the price still makes sense. Silver Lake’s most recent investment in Alibaba valued it at $32bn, so Yahoo’s 1/3rd stake is roughly $10bn+ and then there is the liquid stake in Yahoo Japan and some cash on hand.

    If the Yahoo core operations can be turned around and if you place any value on them, then the deal will be a winner.

    Because of the price, there is very little downside. Also, Silver Lake are clearly bullish on the Alibaba asset and they can be justified for doing the deal just based on that.

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