UPDATE 2-Yahoo seeking up to $500 mln for small business unit

Mon Sep 21, 2009 6:14pm EDT

* Yahoo seeking up to $500 mln for small business unit

* Private equity, corporate buyers could be interested

* Yahoo Hot Jobs, Zimbra also up for sale (Adds quotes, details on Yahoo strategy, Zimbra sale, shares)

By Alexei Oreskovic and Anupreeta Das

SAN FRANCISCO/NEW YORK, Sept 21 (Reuters) - Yahoo Inc (YHOO.O) hopes to get up to $500 million for a unit that hosts websites for small companies, after putting it on the market for several months, two people familiar with the matter said.

Yahoo has received interest from corporate buyers and private equity firms, one of the sources familiar with the situation said. It is unclear if any party has made an offer.

But some potential corporate buyers who have looked at the asset in recent months have decided not to bid because they think the price is too high, a second source said.

"Yahoo's price expectations are higher than what buyers were willing to pay," this person said, adding that Yahoo was seeking $350 million to $500 million. "People would like to own this asset, but not at the asking price."

As part of its strategy to shed assets that are no longer core to its brand, Yahoo put the unit called Yahoo Small Business up for sale about six months ago, along with HotJobs, its online job classified site, the sources said.

Last week, Yahoo sold its stake in China's top e-commerce company Alibaba.com for $150 million.

The sources spoke on condition of anonymity because the sale process has not been made public. A Yahoo spokeswoman said the company does not comment on rumors or speculation.

The small business division provides domains, email, Web hosting and other merchant services to customers. Sunnyvale, California-based Yahoo, which posted $7.2 billion in revenue last year, does not break out the unit's performance.

STRATEGIC BUYER PREFERRED

Yahoo prefers to sell to another company rather than a buyout shop, believing that a strategic buyer would be more likely to pay a higher multiple for the synergies that the unit has with its own business, the sources said.

The sources suggested that private equity firm General Atlantic LLC may be a potential buyer for the Yahoo unit because it owns Network Solutions, a company that provides similar services to small enterprises. A General Atlantic spokeswoman declined to comment.

Tricia Salinero, the managing director of Foster City, California-based M&A advisory firm Newforth Partners, said there was previously a sense that Yahoo would hold on to the small business unit if the company could not get its desired price.

The resurgence of chatter about the deal suggests that Yahoo may be more confident it can get the price it wants or that it may now be prepared to sell at a lower price.

"If they decided it was more strategic to divest the unit, they could lower their expectations," said Salinero.

Under Chief Executive Carol Bartz, who took the reins in January, Yahoo is in the midst of a turnaround strategy focused on rebuilding its brand into a more consumer-centric, advertising-focused one.

That has meant a house-cleaning, with Yahoo evaluating all assets that are not central to its new strategy.

Earlier this year, Yahoo redesigned its home page, and Yahoo Chief Technology Officer Ari Balogh told Reuters in May the company plans to add more social networking features to its properties through a combination of acquisitions and home-grown product development.

Yahoo is also expected to unveil a new marketing campaign in New York on Tuesday.

These efforts come more than a year after Yahoo rebuffed Microsoft Corp's (MSFT.O) $47.5 billion buyout offer, only to see its share price plummet as it struggled with the severe advertising market downturn. Yahoo and Microsoft signed a search advertising partnership this year.

ZIMBRA REPORTED UP FOR SALE

Separately, Kara Swisher of The Wall Street Journal-affiliated blog All Things Digital reported on Monday that Yahoo has also put Zimbra up for sale.

Yahoo bought Zimbra, a provider of online email and calendar software for businesses, in 2007 for about $350 million.

A Yahoo spokeswoman declined to address the report, but said in an emailed statement that Zimbra is a critical part of Yahoo's communication tools.

Shares of Yahoo closed Monday's session down 2 percent at $17.04 on the Nasdaq. (Editing by Phil Berlowitz, Richard Chang, Gary Hill)

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