Yahoo Bids to be Lower than Expected

Yahoo Bids to be Lower than Expected

People familiar with the matter have reported that Verizon Communications Inc. and other suitors are expected to make a bid worth $2 to $3 billion in the auction for the core businesses of Yahoo Inc. This is considerably less than the troubled internet giant had been expected to fetch previously. The telecom company has been deemed as the front-runner in the field, which includes a number of private equity buyers as well. The people said that most of the private equity buyers are expected to make a bid from the lower end of the range.

Up until April, people who had had knowledge of the process had said that the core businesses of Yahoo were most likely going to be sold for somewhere between $4 billion and $8 billion. Other people said that there still could be offers above the $2 billion and $3 billion range because it is considered customary by bidders to keep their enthusiasm down in the action and keep their cards close to their chest. Moreover, it is also possible that not every bidder is going to be after the internet pioneer’s core businesses and some of the offers may be based upon a different structure.

Some of the people said that the next round of the bids would take place in the first week of June as per the deadline set by Yahoo. They added that it remains unclear as to whether this will be the final round or more will follow it. Marissa Mayer, Yahoo’s Chief Executive conducted weeks of sale presentations at the firm’s headquarters in Sunnyvale, California and the disclosure of data simply highlighted the flagging prospects of the company. This may have prompted the bidders to lower their expectation and bring down their prices. Those with knowledge of the matter said that other interested bidders include an investor group comprising of Vista Equity Partners, Bain Capital and former Yahoo chief executive Ross Levinson.

Buyout firm TPG is also in the running and so is the founder of Quicken Loans and Detroit investor, Dan Gilbert, who may be backed by Warren Buffet, the billionaire investor. Valuing the core businesses of Yahoo is difficult partly because a very large portion of the firm’s $35 billion market capitalization is based on the stake it holds in the Chinese firm Alibaba Group Holding Ltd. Last month, it was estimated by an analyst that the business is worth somewhere between $4 billion and $5 billion.

Last month, a reminder was issued by Yahoo concerning the difficulties it faces when its first-quarter revenue declined by 18% to $859.4 million. This excludes the commission given to search partners. This is the first time the figure has gone below $1 billion since the reins were taken over by Ms. Mayer four years ago. The segment of the company’s business that was deemed to be its growth engine by Ms. Mayer is also slowing down. On the other hand, there was a 6.8% rise in revenue from ‘Mavens’, a financial metric introduced by the company last year for tracking video, mobile, native and social ads.

Hassan is a Blogger, Author, Entrepreneur and the Administrator of OnzineArticles.com. He heads Burgeoning Technologies, a Web and IT Company and manages several other blogs and websites. He can be followed on , Twitter and Facebook.

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