This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

What Yahoo! Could Learn From Warren Buffett

NEW YORK ( TheStreet) -- Whoever replaces Scott Thompson in the Yahoo! (YHOO) hotseat should take a leaf from Warren Buffett when it comes to reshaping the embattled Internet giant.

The vast majority of Yahoo!'s $18.5 billion in market cap is in its Asian assets: the 40% stake it owns in Alibaba and the 34.9% stake it owns in Yahoo! Japan. The core U.S. operations, which include Yahoo!'s various properties around the web, including News, Sports, Finance and a host of other assets are worth roughly $1 billion.

When Buffett took over Berkshire Hathaway (BRK.A) in 1962, it was a struggling New England textile firm, but thanks to purchasing businesses outside of textiles, (namely insurance and savvy investing from Buffett), Berkshire transformed itself. Yahoo! could do something similar, albeit focused on the technology space.

There have been already been attempts to try to maximize the value of Yahoo!'s Asian assets, most notably its Alibaba stake, but so far these have been unsuccessful.

Yahoo! may eventually realize the full value in its Asian assets, but perhaps it's in the Internet giant's best interests to extract some value from its stake in Alibaba now and cut back on share buybacks. The Sunnyvale, Calif.-based firm could use that spare cash to invest in high-growth businesses that it thinks will generate outsized returns over the long-haul, similar to Buffett and Berkshire Hathaway. Streaming video specialist Hulu, for example, has already been touted as a possible target.

Having Third Point's Dan Loeb on the board of directors could help facilitate a new strategy at Yahoo!, given Loeb's propensity for investing in under-valued companies. Yahoo! had $2.65 billion in cash at the end of the first quarter. ICoupled with several billion from a partial sale of its Alibaba stake, as well as a reduction in the company's buyback program, Yahoo! would have more than enough cash to execute this strategy.

There is, however, still the question of what to do with Yahoo!'s core U.S. operations, its 700 million users and all of the data that goes along with them. Does the company turn around and sell these to more traditional media firms, such as News Corp. (NWSA), Bloomberg, or Thomson Reuters (TRI)? It will be interesting to see what happens.

For now, interim CEO Ross Levinsohn has a lot of decisions to make regarding Yahoo!. Does he keep with Thompson's plan of focusing on technology and data? Does he keep the core focus on media and advertising, which are his strong suit? Or does he try to engineer a turnaround that will turn Yahoo! into the Berkshire Hathaway of tech? Only time will tell.

Interested in more on Yahoo!? See TheStreet Ratings' report card for this stock.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices.

-- Written by Chris Ciaccia in New York

>Contact by Email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,265.99 +109.14 0.64%
S&P 500 2,011.36 +9.79 0.49%
NASDAQ 4,593.4250 +31.2360 0.68%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs