It's Time to Sell Yahoo!

NEW YORK (TheStreet) -- If you have Yahoo! (YHOO) stock, sell it, because the value of the company's stake in Chinese Internet company Alibaba seems to be fully realized.

Yahoo! is not growing, nor is it likely to. For its most recent quarter, Yahoo! announced GAAP earnings of $30 million, or 29 cents per share, on revenue of $1.09 billion, excluding traffic acquisition costs.

That was considered a positive surprise. The stock rose 8% overnight, mainly because Alibaba, the company of which Yahoo! still owns 24%, had $3.06 billion in revenue, a jump of 66%.

Once Alibaba goes public, later this year, those who want to bet on it will have Ailbaba's stock to play with. We have reached peak Yahoo!, in other words, and it's time to sell.

That is also true, by the way, if you're a member of Yahoo!'s board. It is time for you to find a buyer. 


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CEO Marissa Mayer has now spent 17 months huffing, puffing and buying smaller companies. She has turned over the staff. She has had her chance to produce growth. And today's Yahoo! is little changed from the company she joined.

Yahoo! is an Internet media company, accent on media. Yahoo! is news, weather and sports -- not search. And Yahoo! doesn't have the financial heft to compete in technology against heavyweights Facebook (FB), Google (GOOG) and Amazon  (AMZN). There, Yahoo! is a minnow among sharks. If they want something Yahoo! wants, Yahoo! will be outbid.

But who would buy Yahoo!?

Alibaba is the most obvious buyer, but Yahoo!'s big presence in media may have immunized it from that takeover. The idea of a Chinese company buying a U.S. media outfit, even an Internet media outfit, would likely prove more trouble than it was worth.

Yahoo!, and Mayer, would be lost inside another tech company, and so if I were on her board, I'd start with other media companies, all of which need a bigger web presence.

Disney (DIS) would be a candidate. Fox (FOXA) would be a candidate. Even Comcast (CMCSA) could be a fit. These companies have the market capitalization to acquire Yahoo! and retain its Alibaba stake.

But if Marissa Mayer wants a future as a CEO, there's really only one obvious choice: CBS (CBS).

CBS wants to be bigger in the Internet. CBS bought CNET almost a decade ago to get big in the Internet. CBS has even been making noises about becoming an Internet-only network if Aereo's streaming of over-the-air content is shown to be legal. 

If CBS really wants to do that, it needs Yahoo!. If CBS wants serious Internet revenue, it needs Yahoo!.

And if CBS CEO Les Moonves, 64, wants to show Wall Street he has a clear succession plan in place, he needs Yahoo!, and he needs Yahoo!'s CEO, who is not yet 40.

CBS' market cap of $35.11 billion could be a problem. Yahoo!'s cap of $34.53 billion would make a CBS deal a merger of equals. But most of Yahoo!'s market cap represents Alibaba, and could be cashed out readily, leaving CBS with $4 billion a year in Internet revenue, a mobile presence and a cloud with which it can carry out its threats of abandoning broadcasting.

Besides, for years people have been writing that Moonves is overpaid. Mayer would fit right in.

At the time of publication the author owned shares in Google, Amazon, Comcast and Yahoo!.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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