Yahoo Bidding War: Why Does Warren Buffett Want to Board the Sinking Ship?

Warren Buffet to buy Yahoo

The fairytale of Yahoo’s success in its early years is soon to be ending in a tragedy because of a bundle of decisions that backfired for it in the recent past. While it’s no secret that the Marissa Mayer, CEO – Yahoo! Inc. (NASDAQ:YHOO), failed measurably only to get Yahoo! under auction hammer, it’s even more interesting to learn how her much-talked MaVeNs strategy proved to be a disaster. As Yahoo! is silently exploring the options for the best buyout, and buyer as well, the interest of one particular business magnate has caught the attention of everyone. According to Reuters, Warren Buffett, Chairman – Berkshire Inc., has recently conglomerated with the giants who are willing to buy Yahoo’s internet assets. Yahoo’s market value stays at $34.6 billion, while Wall street Journal assesses its core businesses worth $4 to $8 billion.

The interesting element is that Warren Buffett doesn’t belong to a technological background and his interest in the company has surprised everyone. Along with Buffett, the consortium also included Dan Gilbert, the founder of Quicken Loans and the owner of NBA team.

Verizon Communications, the US telecommunications giant, is also keen on buying Yahoo, competing with other private equity firms like TPG who had also attempted to get hold of Yahoo in the first bid.

Verizon, however, is the topmost favourite for buying Yahoo! and this claim is fructified by the fact that the company has lately acquired AOL for $4.4 billion and having Yahoo! under his belt will only strengthen its internet presence.

Buffett once admitted that his firm, Berkshire, lagged a little behind due to a slow adaptation of the upcoming technologies, and, apparently, that could be the prime reason of his interest in Yahoo!.

The other reason may be Susan Decker, Director in Berkshire board, who was a former Yahoo employee in a number of senior roles, and knows Yahoo quite well. She once said in an interview with CNBC that she is sure that some owner will be able to rejuvenate the lost spirits of Yahoo and will be able to instil Yahoo in customer minds again.

Yahoo posted dismal revenue figures in the last quarter garnering $1.09 billion in revenue. The figures are quite low and discouraging for Yahoo compared the same quarter last year.

Yahoo has lost its grounds in every business; Google took over Yahoo’s numero Uno position in the online search market. Its digital advertising is suffering because of AdWords and the major shift of its advertisers to other platforms like Facebook, Twitter, etc. Despite multiple attempts the internet giant failed to replicate the success of its email, search and messenger. The company also missed the bus of social media and let the other comparatively very small competitors, Facebook and Twitter, encash the opportunity, worth billions of dollars.

While there are many reasons that could be attributed to Yahoo’s downfall but among all the main reason is being cited to its current board and its decision to appoint Marissa Mayer as CEO of Yahoo!. The multiple decisions that Marissa Mayer and other board members formulated to enhance Yahoo backfired for the company and resulted in its debacle.

Why is everyone interested in the drowning Titanic?

Yahoo is not totally drowned as it still possesses an estimated 1 billion regular users who surf Yahoo for news, scores (sports), Yahoo Mail etc. Apart from that, the company also owns patents worth between $3 billion to $4 billion.

Yahoo’s investors are keen on selling company’s assets at a modest value to avoid any further losses, but the main hurdle for them is Alibaba’s stake in Yahoo. In other words, Yahoo is up for grab at a relatively throw-away price, which is making investors and buyers pool in to get hold of Yahoo!.

In other words, the top honchos of Yahoo!, including its CEO Marissa Mayer, are void of any ideas now and need a fresh start, the acquisition will provide them with new strategies and plans.

The favourite bidder

While it has established that Yahoo! is up for sale like a hot potato in the market, let’s briefly talk about the favourite bidder, US telecommunications giant Verizon Communications. The question arises as why a telecom company would show a great interest in the drowning ship of Yahoo.

According to Fortune, as the telecom business is slowing gradually Verizon is looking for newer and prosperous avenues; and the most fruitful one for Verizon could be Yahoo’s advertisement and content business.  To elaborate, Verizon wants to harness revenues from digital advertising on mobile devices. Well, it’s the same reason for which Verizon bought AOL.

Final Words

It may be interesting to see how the overall development will take a shape, but considering the increasing interest among investors towards Yahoo! has proved one thing: Yahoo! is not a done business. Undoubtedly, Yahoo! is a beast of the Internet and owns services, products and offerings that could turn the tides any moment, conditioned to its proper and impressive re-positioning in the market. And, that’s quite likely to happen if business honchos like Warren Buffett have their vested interest in i

To Top