Yahoo! Inc. (NASDAQ:YHOO) is poised to collect over $5 billion cash after taxes by selling some of its stake in Alibaba Group Holding Ltd (NYSE:BABA) which rose roughly 40% from its offering price today before falling back to about 35.5% above the offering price. With the understanding that Yahoo is going to have a good deal of cash lying around, speculation that Yahoo will use the money to acquire AOL, Inc. (NYSE:AOL) has once again come to the forefront when it comes to guessing Yahoo’s next move.
Yahoo’s move makes sense?
If content is king, the move makes sense. Yahoo! Inc. (NASDAQ:YHOO) has gone a long ways in beefing up its financial and sports reporting while AOL’s expansion into video has proved largely successful. Additionally, AOL, Inc. (NYSE:AOL) own the Huffington Post which is a preferred news source for millions. With a market value of roughly $3.4 billion, Yahoo would have no trouble affording AOL, and since taking the reins at Yahoo, Marissa Mayer has never hesitated to “go shopping.” While she has promised investors that she will use some of Yahoo’s new cash to repurchase Yahoo shares, she has been coy about the actual amount of money the company would set aside for a stock buyback.
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Despite all these acquisitions by Mayer which as made the company “younger,” they have failed to bring any new real revenue or profits back to Yahoo. It’s well known that Mayer and AOL CEO Tim Armstrong get along and spent years together at Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL). In fact, it is the dinners the two have been seen sitting down do that has often led to suggestions by the media that and AOL acquisition was imminent.
Don’t do it
Many experts don’t believe that Yahoo! Inc. (NASDAQ:YHOO) has any business getting near AOL, and it could certainly be argued that some of the hip that Yahoo has purchased through Mayer’s acquisitions would be lost if it picked up the “old man” of the Internet that still employs a subscription-based business model that most have shunned and moved away from over the last decade.
There are a number of experts who are firmly against Yahoo! Inc. (NASDAQ:YHOO)’s potential acquisition of AOL, Inc. (NYSE:AOL). Instead they believe it wiser and more likely that Mayer will purchase an online ad company like Rocket Fuel or The Rubicon Project or even AppNexus.
Eric Jackson, managing partner of Ironfire Capital, a hedge fund that owns shares of Yahoo, hopes they simply sit on their money.
“I hope Yahoo doesn’t buy anything. I’m a little fearful of what Mayer will do with that cash,” he said.
via: CNN Money