Updated from 12:08 P.M. to include facts about declining EBITDA, total headcount, and slowing revenue growth.
NEW YORK (TheStreet) -- Over the last two weeks, I have spoken out in favor of Yahoo! (YHOO) accepting a buyout offer from either Alibaba or SoftBank, as well as why I believe Marissa Mayer must not stand in the way of such a transaction even though it's against her own self-interest.
I have laid out the self-inflicted mistakes I perceive she has made over the course of her tenure as CEO:
- Hiring and firing Henrique De Castro as COO and head of sales.
- Instead of laying off excess employees, she has increased headcount at Yahoo!. At the end of the second quarter, Yahoo!'s total headcount increased 5% versus the prior year to approximately 12,200 employees.
- None of the $2 billion in acquisitions she has made to date are reflected in the value ascribed by investors to the core business, which suggests she will continue to make value-destroying acquisitions after receiving the Alibaba IPO stake sale cash. Second quarter revenue came in at $1.084 billion, down from $1.135 billion in second quarter of 2013.
- The fact that she has hyped mobile user growth for Yahoo!, even though it would have happened anyway given the secular move of desktop users to mobile, and she likely doesn't discuss mobile monetization because it's very poor. On the second quarter earnings call, CFO Ken Goldman said Yahoo! has "given the exact percentage" of how much revenue comes from mobile, but did note "it is meaningful."
- She has rewarded herself and her management team with excessive stock compensation in the facing of declining earnings before interest, taxes, depreciation and amortization (EBITDA). During the quarter, the company recognized $340 million in Adjusted EBITDA, down from $369 million in the second quarter of 2013, despite monetizing a portion of the company's patent portfolio.
Longtime Yahoo! shareholders like me suffered for years under poor management and board neglect. Though it's been heartening to watch the stock price increase from $11 in 2011 (pre-Marissa) to now $35, it's obvious to all that this is almost entirely due to the increase in value of Alibaba from $20 billion in 2011 to what many think will be $200 billion post-IPO.
Once you look at the current price and tease out all the components, investors either believe the core business (Search and Display) is worth nothing (when it has twice the EBITDA of AOL (AOL), which has a $3.1 billion valuation) or they are assuming any cash Yahoo! has and will soon get will be wasted on value-destroying acquisitions which will transfer the Alibaba cash to venture capitalists and entrepreneurs instead of returning it to Yahoo! shareholders.
Yet, as I've made the case for already, if either Alibaba or SoftBank were to acquire Yahoo!, they could pay up to $20 billion more for Yahoo! and -- thanks to tax savings of reacquiring their own stakes -- still effectively pay the same price as any other potential buyer of Yahoo! at the current price.