NEW YORK (TheStreet) -- Yahoo! (YHOO) shares surged after the company announced a tax-free spinoff of Alibaba (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report in its fourth-quarter earnings report on Tuesday after the close.
Sunnyvale, Calif.-based Yahoo! earned a non-GAAP EPS of 30 cents per share on $1.18 billion in ex-TAC revenue, compared to estimates of 29 cents a share on $1.19 billion in revenue.
But the big reveal in today's report was Yahoo!'s plan to spin-off of the company's remaining stake in Alibaba, which will result in two separate public companies: SpinCo, which will own its Alibaba shares, and Yahoo!. All of the SpinCo shares will be distributed to shareholders, ensuring the biggest possible capital return.
Yahoo sold shares in Alibaba's IPO but has a remaining stake valued at around $40 billion. The company also has a 35.5% interest in Yahoo Japan, which is worth about $2.3 billion and which will not be spun off. Together, Yahoo's Asian assets account for the bulk of the company's roughly $47 billion market capitalization.
The Alibaba transaction is expected to be completed in the fourth quarter of 2015.
Yahoo's shares were rising 7.54% to $51.61 in after hours trading.
For the full financial year, Yahoo! reported revenue of $4.62 billion and a non-GAAP EPS of $1.57 per share, compared to estimates of $4.41 billion of revenue and $1.59 a share.
"I'm pleased to report that our performance in Q4 and in 2014 continues to show stability in our core business," said Marissa Mayer, Yahoo's CEO. "Our mobile strategy and focus has transformed Yahoo and yielded significant results. In Q4, we saw $254 million in mobile revenue, up 23% quarter-over-quarter. Across all of 2014, we saw gross mobile revenue of $1.26 billion and GAAP mobile revenue of $768 million. Our investment businesses - mobile, video, native, and social - collectively delivered more than $1.1 billion in GAAP revenue, up 95% year-over-year. These growth drivers have really focused our investments and energy on the future of digital advertising."
Overall revenue for the quarter was down 2% year-over-year, as was display revenue which was down 5% YOY to $464 million. Search revenue, however, was flat YOY at $462 million.
Yahoo! also disclosed that it repurchased about 22 million shares of stock at an average price of $45.26 for $980 million in the fourth quarter. It also repurchased about 16 million shares of stock under a new accelerated share repurchase agreement for $800 million.
--Written by Rebecca Borison in New York
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