NEW YORK: China’s Alibaba will star on Wall Street with its upcoming stock offering, but US-based Yahoo also gets a windfall, which may help the turnaround efforts of the fading Internet pioneer.
Yahoo, which bought a 40 percent stake in the Chinese online giant in 2005 for $1bn, still holds 22.4 percent of Alibaba. And the California company is expected to walk away with $7bn to $9bn by paring that stake down to 16.3 percent.
The huge public offering for Alibaba comes with Yahoo seeking a new direction under chief executive Marissa Mayer, who took the reins in 2012 in an effort to redefine the company’s mission after it took a back seat to Google and others.
Analysts say the cash offers Yahoo an opportunity, but that it needs to use it productively.
“Alibaba is giving rocket fuel to Yahoo, but the problem is Yahoo still has to develop the engines,” said Trip Chowdhry at Global Equities Research.
Yahoo said in July the majority of the proceeds of the sale of Yahoo’s stake would be returned to shareholders.
The remainder could help fuel acquisitions to help Yahoo rev up its sagging revenue base, after a four percent year-on-year drop in the latest quarter.
Mayer has been on a buying spree, which has included the blogging platform Tumblr last year for $1.1 billion as part of an effort to draw in younger Internet users.
Chowdhry said Yahoo should also use some of the cash to “innovate” and improve some of its existing services, such as Yahoo Mail and Yahoo Finance, and Web hosting and services for small business. AFP
