Forget Microsoft, Yahoo’s value is overseas

August 25, 2009

— Eric Auchard is a Reuters columnist. The opinions expressed are his own —

eric_auchard_columnist_shot_2009_june_300_px2The fate of Yahoo Inc has become intertwined in the public’s imagination with the success or failure of its dealings with Microsoft Corp in recent years.

That’s despite the fact that as much as 70 percent of the value investors put on Yahoo’s depressed shares are tied up in its international assets or cash holdings — factors that have nothing to do with Microsoft.

Yahoo’s operations trade for just $5 to $6 per share out of its current $15 share price, once you exclude its Asian investments and the value of its cash. Its hidden assets in Japan and Chinese affiliates — Yahoo Japan Corp and China’s Alibaba Group — alone are worth around $6 to $7 per share.

The trouble is that Yahoo needs to find a way to cash out of its increasingly rocky relationship with Alibaba Group, in which it holds a 39 percent stake after it pulled back from operating its own business in China in 2005.

yahoo_chinaYahoo’s best chance here may come next year if Alibaba succeeds with a second IPO of its consumer ecommerce site, building on the success of the 2007 IPO of, now valued at more than US$13 billion on the Hong Kong exchange.

Truth be told, Yahoo’s huge success in building the biggest U.S. Internet media destination never translated very well overseas, despite the early foray into Asia that left it with lucrative assets in Japan and China. These passive investments came to substitute for a global operating strategy.

But that’s changing now, as Yahoo once again has begun investing in international operations it can fully control.

maktoob_logoIn its latest such push, Yahoo said on Tuesday that it would buy, the largest Internet media site for the Arab world, with an estimated 16.5 million users. Terms were not disclosed.

Yahoo’s international stronghold is Asia, where it had 172 million unique users in the month of June, according to industry estimates. It is the top player in Japan through its stake in Softbank-controlled Yahoo Japan, and is dominant in Taiwan and Hong Kong as well.

Yahoo IndiaIn India, Yahoo has the most visited home page and is the most popular provider of e-mail, instant messaging and online news to consumers. In a country mad on the sport, Yahoo operates the most popular site for cricket fans. Yahoo had 23 million unique monthly users in India in June, according to market researcher comScore.

But Yahoo stock gets little to no stock market credit for these international operations. Converting market share into meaningful financial results will take years. First, Yahoo must develop its patchwork of leading properties in places like the Philippines and Vietnam and Latin America into a global franchise. And it’s hard to see how Yahoo can regain lost ground in Europe’s more developed Internet markets.

Until now, the trap for Yahoo has been that much of its international value remains latent, locked up in investments in Japan and China rather than in operating businesses it controls. That is changing, slowly.

This leaves Yahoo at the mercy of an eventual rebound in U.S. advertising markets. For the foreseeable future, any significant rebound in Yahoo’s share price depends on conjecture over the still unknown potential of getting into bed with Microsoft.

— At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article, with the exception of a token Yahoo share. He may be an owner indirectly as an investor in a fund. —


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Say it ain’t so – Yahoo is Big In Japan?

Unfortunately, all the growth areas cited here are notorious fad markets.

If it’s in trouble regaining lost ground in Europe, as signs are, Yahoo needs to rebrand, ditch the amateurish logo, stop tagging all its email with smarmy little ads and emerge (if it can) as a truly impartial, value-perception driven community of record instead of just whatever mental teenagers who hadn’t read Gulliver’s Travels once happened to be using for the time being.

Maybe then…

Posted by The Bell | Report as abusive

Does anyone think that most of these large IT companies
are harrassing the surfers by installing illegal software
on their computers resulting often browser/cursor being
disabled and thus loss of online stockmarket dealings and
several other financial losses?? Congress need to pass
laws levying HEAVY HEAVY penalties on these companies
whose names I donot want to specifically mention but they
seem to be top end of the IT complex.

Posted by jjmk4546 | Report as abusive

Dear friend,
With interest,i have completed your article on Yahoo!s share value,future investments and so on.
i am a member of all world leading websites
As per my knowledge goes,Yahoo is very popular in India.
All my major friends in face book are users of yahooId
Through yahoo Id,i am able to send instant messages to my friends and relatives in overseas.
More and more Indians are getting latest cricket sports events from the above mentioned website.
After reading of this article,i came to conclude that,Yahoo will be high competitive internet users in future years.
Before finishing this sentence,one off line and one online message from Yahoo
Tremendous benefits for its users.

Posted by krishnamurthi ramachandran | Report as abusive

I think Maktoob has great revenue potential for Yahoo. You can see their revenue details and community growth from 2001-2005 here: oob_revenue_from_2001_to_2.php

Posted by Salman | Report as abusive