Analyst: Yahoo worth more as an organ donor
Yahoo (YHOO) stock moved higher this morning (nearly 3 percent) after an analyst at respected firm Sanford C. Bernstein said the Internet giant would be worth more if it were broken up and sold in pieces.
This assessment should come as no surprise. Though the stock traded in the $40-per-share range a couple of years ago, it now languishes below $30 as investors bemoan the fact that the company has failed to generate Google-sized online ad revenues and growth. And the company has made no secret of the fact that it needs a management overhaul. The company not only shook up its top ranks recently, it reportedly brought in Apple (AAPL) CEO Steve Jobs to deliver a pep talk during a recent leadership meeting.
"It appears that Yahoo will not take bold measures to right the ship," analyst Jeffrey Lindsay wrote in his report recommending the breakup. "We believe that Yahoo still has a potentially high intrinsic value. We believe, however, that to stop the inevitable slide into irrelevance the management team must consider more radical actions and strategies …. Incremental changes to rebuild revenues simply won't cut it this time."
Lindsay said that after a two-to-three-quarter honeymoon period for interim CEO Jerry Yang, investors will demand results. Among the analyst's suggestions for boosting the stock: Let Google (GOOG) handle paid search on Yahoo's pages, cut a quarter of the Yahoo staff (which would be nearly 3,000 workers), and continue overhauling the ad business. Do that, he said in an earlier note, and Yahoo could jump to $45 per share.
Private Equity Games and M&A scenario is dud for now. As analysts, its thus time to get into more adventures that bring money. Our investment banking colleagues also need to make money, isn't it? So lets suggest breaking up of everything.