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 But with numerous holes to fill and soaring tech company valuations,
Yahoo will have to make tough choices with any acquisitions.
Yahoo is expected to sell about $9.5 billion in stock of the Chinese
e-commerce company. After giving at least half back to investors and
paying taxes, Yahoo's cash stockpile, currently $4.2 billion, may
swell by $3.1 billion. That is not a lot in Silicon Valley these
days.
“They are not in a position to make huge acquisitions,” said Jean
Yu, assistant portfolio manager of the $2.8 billion ClearBridge
Value Trust fund, which owns Yahoo shares. Yu expects the new
proceeds to be used for deals around several hundred million dollars
each.
Yahoo’s revenue growth has stalled in recent years as its once-hot
Web portal and email service have lagged rivals. Key areas in need
of repair include Yahoo's mobile offerings and an advertising system
that doesn't deliver the precise targeting available from rivals
like Google Inc and Facebook Inc, investors say.
Yahoo is not one of the first three or four places that consumers go
to on their mobile phone, said Bill Tai, partner emeritus at venture
capital firm CRV.
“All the momentum right now is shifting rapidly to mobile," said
Tai.
Chief Executive Marissa Mayer has more than doubled monthly mobile
users to 450 million since taking the helm two years ago. She
revamped the line-up of mobile apps by making small acquisitions
that brought in teams of mobile engineers.
That may be the path forward, too, since many of the best-known
mobile properties are out of Yahoo's financial reach. Messaging
service Snapchat, for instance, was recently valued at close to $10
billion, according to the Wall Street Journal.
Online review site Yelp Inc is a long-rumored Yahoo acquisition
target that could help Yahoo expand into new "transactional"
businesses, such as restaurant food deliveries from which Yahoo
would receive fees. But with a $5.5 billion market cap, Yelp would
represent a huge acquisition for Yahoo that might not go over well
with investors.
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Yahoo was not immediately available for comment.
Some argue that Yahoo could get more bang for its buck by focusing
its acquisitions on advertising technology, a sector where prices
are not as rich.
Publicly-listed ad tech companies such as The Rubicon Project Inc,
YuMe Inc and Tubemogul Inc all have market values of roughly $400
million or less, while the privately-owned AppNexus was valued at
$1.2 billion in its most recent funding round.
Advertising also could deliver an immediate jolt of revenue, said
Pivotal Research Group's Brian Wieser. "The good news about ad tech
is there are a lot of real businesses."
(Reporting by Alexei Oreskovic; editing by Peter Henderson)
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