I never hear anything good about Yahoo’s finances. Is the company making money? How can it afford to spend a huge sum like that?
Thanks for orienting me!
Presumably with the $5.4 billion in cash they had sitting around.
If they have that much cash sitting around, why are they not considered a successful company?!
Or, just as likely (even w/ $5.4B in cash sitting around) with lots and lots of leverage. There are certain advantages to debt financing, even if you could just walk in with $1.1B in a briefcase and buy it cash money.
Why do you think they aren’t? At one point they were rumored to be sold to Microsoft for about $50 billion. $1.1B is a small fraction of the value of the company. Even at current prices its market cap is nearly $30B.
The negative news is just that it isn’t as successful as it used to be. Earnings had been dropping year-over-year for awhile until recently and Yahoo! hasn’t really charted a path forward in the mobile world.
I still can’t understand the valuations of internet companies. From wikipedia
Buying a company for 84 times last years earnings (or even 11 times this year’s hoped for earnings) just seems crazy to me. I’m just a dinosaur I guess…
It does seem high, but apparently Tumblr was valued at $800M a few years ago. So it’s not crazy high. It’s not $5B-for-Geocities high (which is what Yahoo! paid after adjusting for inflation back in 1999).
Yahoo! killed that one so we’ll see how they do with Tumblr.
I don’t think Tumbl has ads right now, they may in the future, but it’s not that, it’s that as of right now, Yahoo has no Social, Mobile or Cloud presence. Tumblr will knock out two birds with one stone (Social and Mobile). Marissa is making a lot of changes and this is one of them. $1.1 billion seems like a lot of money, but I’m guessing she knows what she’s doing. On the one hand, you have to remember it’s like a store saying “Let’s bring in a [service] kiosk”. The kiosk itself might not be worth that much, but if the service/brand is well established and has lots of customers, now all those customers will have to come there to get their service. Tumblr might be worth 1.1b to Yahoo, but only be worth half that to some other company who can’t do anything with all the traffic other then provide them with Tumblr.
OTOH, I have to wonder if part of the reason she gave them 1.1b was, even a little bit, for the media attention of being more then the 1b that Instagram was bought for a little while ago.
It’s last year’s or current year pro forma revenue. They had negative earnings.
They’re not buying a company, they’re buying eyeballs.
Usually having a bunch of cash sitting around isn’t a good thing. A great company will always have someplace to invest it for good returns. You need working cash for operations, but anything beyond that is a wasted investment for shareholders. You don’t invest in a company so it can put your money in the bank and earn half of a percent on it.
This is especially creepy seeing how I just posted about Coraline.
As I understand it, a lot of companies are sitting on mountains of cash these days because there’s still a lot of uncertaintly about the economy, especially in companies with exposure to Europe. They’re hoarding all that money in case they need it to ride out a prolonged recession, or even a depression.
That’s true. A lot of companies are currently in the unenviable position of having tons of cash and nothing they want to spend it on.
In those situations, shareholders will often start to agitate for dividends and buybacks. That has happened at Apple, which still has an enormous cash horde and started using some of it to buy back shares and pay dividends recently.
Hoard. The cash horde is the mass of people who want the dividends.
And if you cash whored you might have met up with one of the cash horde using their cash hoard.
I understand the ROA thing. I was just surprised to learn that Yahoo had any cash at all, since I’ve never heard a good thing about them in the press since, say, 2000. Or at least it seemed so to me.
A lot of their current cash hoard came from their sale of their 40% stake in Alibaba for some $7.1 billion back in 2012.
Yahoo! has actually been consistently making a profit for quite some time, at least ever since they got into PPC advertising in the early 2000s, which has essentially been their cash cow ever since.
I believe that only reason the press hasn’t been particularly friendly is because profits weren’t as high as projections. That, and because they’re Not Google.
Yahoo! has been on the upswing since Marissa Mayer took over last year, which I think is at least in part due to the Google-juju that she brought with her. The stock has grown significantly since September, almost doubling in value, which accounts for a lot of that extra cash (in addition to the Ali Baba sale, as friedo pointed out).
Thanks for the insights!