Ding, ding, ding! That’s the sound of longtime Yahoo investors celebrating the fact that their shares finally hit $33 this week, for the first time in more than five years since then-CEO Jerry Yang turned down Microsoft’s offer to buy Yahoo for that price.
Yang was holding out for $37, according to reports back in 2008, but Microsoft’s Steve Ballmer said no way – and Yahoo promptly went into a slide that it’s taken this long to reverse.
Five years and five chief executives later, Yahoo shares are now on a tear. (The stock briefly hit $33 on Thursday and was trading above that level Friday.) Current CEO Marissa Mayer is getting a lot of credit for reinvigorating the company with an increased focus on new products and mobile technology. But Yahoo’s ad business is still struggling and most analysts say the real catalyst for the surge is investor excitement over theimpending stock market debut IPO of Alibaba, the Chinese ecommerce company, in which Yahoo owns a sizable stake.
Alibaba’s business is booming, and its IPO is expected to be among the biggest of the year. Wedge Partners investment analyst Martin Pyykkonen estimated recently that if Alibaba debuts at an expected market value of around $100 billion, that could bring Yahoo at least $8.5 billion in cash after taxes – with a large portion of that returning to Yahoo shareholders through a company effort to buy back its own stock.
Traffic to Yahoo’s Internet sites is improving, and that should lead to a gradual improvement in its advertising business over the coming year, Pyykkonen said. But for now, most Yahoo shareholders are probably keeping a close eye on Alibaba.
(Photo of then-Yahoo CEO Jerry Yang in 2008 by Paul Sakuma/AP)