There is value in Yahoo. It’s real and tangible. While conventional wisdom would look at the trends and the follies of the beleaguered tech firm as a sign that they would be a bad investment, there’s another perspective that knows that now is the best time to buy. I know. I’ve been there.
No, I’ve never worked for a huge tech firm. I have, however, been a part of a company with loads of potential but other challenges that made us ripe for acquisition at a bargain-bin price and the results were incredible for everyone involved.
Today’s Yahoo has seen a string of CEO and board follies that make AOL leadership seem divine. The latest round is the case of the resume-padding CEO, but it’s really just the tip of a trend that has been going on since before Microsoft offered to buy them.
There are three times when a big company forks out the cash and shares to buy a little company:
- When a company is hot and rising, such as when Facebook bought Instagram
- When a need must be filled, such as when Google bought Motorola Mobility
- When a company hits (or is close to hitting) rock bottom, such as where Yahoo is today
The last is obviously the riskiest and can only be pulled off by a company in rock-solid financial standing. It has to be a purchase that would not greatly-damage the larger company if the deal proves poor. There has to be an upside and the assets need to be the type that can be chopped up and sold for scrap if necessary.
Most importantly, it has to be acceptable by all 4 major players in the deal: the buyer, the seller, the government, and the media.
The government would be the reason that Google would have to be excluded. They would never approve a deal that would bring Yahoo under Google’s wing.
Appealing to the buyer (and more importantly, the shareholders of the buyer) would exclude most major communication companies such as Comcast or NewsCorp.
The media would make it unrealistic for any foreign-based companies buy up Yahoo as they would only be doing so to get to Alibaba, the Chinese eCommerce behemoth.
This leaves 3 companies with hypothetical eyes on Yahoo. They are the obvious choices, of course, and the chances of it happening are slim only because none of the three have a true need to buy. That doesn’t mean they shouldn’t.
- Apple has the cash and the strength to finally get into the web advertising and click control that Yahoo holds
- Facebook wants to get into search and they need to have influence outside of their walled garden if they plan on being huge indefinitely; there’s also friction regarding patents that could be lubed up nicely
- Microsoft could get the company that they once wanted for 1/3rd the original offer price
All longshots. All impractical. The only thing that makes it even possible is that if there was ever a great time to get Yahoo in the bargain bin, now’s the time.