Over the course of the last several months, there have been numerous reports that Yahoo has been in talks to potentially sell off its core internet business. Now however, Bob Peck, an analyst at Sun Trust, is predicting that there is a chance that the deal might not even happen at all.
Peck published a note on Monday in which he laid out the reasoning behind his predictions regarding Yahoo. He believes that the company may walk away from a deal if it is unable to find an attractive enough offer for its internet business which was once valued at $10 billion.
At this point, it is highly unlikely that Yahoo will be able to sell its internet business for that amount. Peck has pointed out a number of risk factors that may be lowering the bids the company has received.
The first of which is that the Yahoo’s core business is declining at a double digit pace. It’s revenue, excluding traffic acquisition costs (TAC), has dropped 18 per cent year over year.
Digital advertising in the US grew by 21 per cent during the first quarter of 2016 to around $16 billion. However ad spending on Yahoo is expected to be down by 30 per cent this year according to Standard Media Index.
Yahoo also has a great deal of unknown deals that potential buyers have just begun to learn about. The most recent came to light last week, when it was revealed that Yahoo would have to pay Mozilla over $1 billion until 2019 even if the company behind the Firefox browser decided to walk away from a search deal.
In his note, Peck speculated on the potential bids that Yahoo received, writing: “We think it is quite possible that bid prices could actually have declined during the past month … At some price level, the board may feel it is better to simply spin off the core to shareholders in a taxable transaction.”
Although Yahoo may not receive the $10 billion it thinks or used to think its internet business is worth, Peck still believes that the company could likely receive an offer in the $6 billion price range for its core business and patent portfolio.