| SAN FRANCISCO, July 15
SAN FRANCISCO, July 15 Yahoo Inc cannot
seem to part ways with Alibaba IPO-BABA.N. And with Yahoo's
business continuing to deteriorate, some Wall Street analysts
say it is hard to blame the company.
Yahoo said on Tuesday that it would keep a
bigger-than-expected chunk of its stake in Alibaba when the
Chinese e-commerce company goes public later this year.
That could give Chief Executive Officer Marissa Mayer, who
celebrated her two-year anniversary at Yahoo's helm this month,
more time to achieve a turnaround that has proven elusive.
"It remains a very large fig leaf," Pivotal Research Group
analyst Brian Wieser said of Yahoo's Alibaba stake, which he
said "obscures" Yahoo's weak results. "A lot of investors will
certainly view it very favorably that they're holding on to
more" of Alibaba.
Yahoo missed Wall Street's targets on Tuesday after a 24
percent plunge in online display advertising rates during the
second quarter. Executives blamed difficulties selling premium
ads to marketers as well as delays in rolling out a new
advertising system. It expects to fix the problems over the next
one or two quarters, but overall revenue growth remains well
below rivals such as Google Inc and Facebook Inc
Yet the company's stock has more than doubled since Mayer
took over in July 2012. Analysts credit the ever-increasing
value of Alibaba, of which Yahoo owns roughly 24 percent.
Alibaba is expected to list its shares on the New York Stock
Exchange this fall in what could be the largest U.S. technology
IPO. Investors value the company, which handles more e-commerce
than Amazon.com Inc and eBay Inc combined, at
as much as $200 billion.
Now, instead of being required to sell 208 million Alibaba
shares in the IPO under the terms of a deal with Alibaba, Yahoo
must sell 140 million shares, the company said on Tuesday.
"Anytime you can keep more of an asset that's growing as
fast as Alibaba is, that's a good thing," said JMP Securities
analyst Ronald Josey.
Mayer has improved certain aspects of Yahoo, such as
boosting its mobile users, said Josey. But as the Alibaba IPO
approaches, investors will increasingly focus on its shaky
fundamentals, he said.
Asked if Yahoo paid Alibaba to amend the share sale
agreement, Yahoo Finance Chief Ken Goldman told analysts on a
conference call that "there is nothing specific that we have
While retaining a larger slice of Alibaba might keep
investors happy and take the heat off Yahoo's own business, the
move is not without its risks, noted BGC analyst Colin Gillis.
If Alibaba's stock price does not fare well after its IPO,
as occurred to Facebook in 2012, Yahoo may rue not selling
"They have a window to sell and they're choosing not to,"
Gillis said. "Now they're playing investor on us."
(Reporting by Alexei Oreskovic; Editing by Lisa Shumaker)