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Without Bartz, will Yahoo rebuild or sell?

Microsoft could be waiting for another swing at buying Yahoo

September 9, 2011 01:45 PM ET

Computerworld - With Carol Bartz out as CEO at Yahoo, speculation is rampant that the board of directors is looking to sell the struggling company.

"I think that may be now is the right time to explore those options," said Dan Olds, an analyst with The Gabriel Consulting Group. "As some have been suggesting, Yahoo could sell off some of its bigger assets to make itself more attractive to a potential acquirer. Whether they sell or not, they absolutely need to take a hard look at all of their assets with the mindset that they're going to prune away the ones that don't make sense for the future."

If Yahoo's board does want to sell, it won't be easy to find the right fit, though, added Olds. With a $17 billion market capitalization, Yahoo is still a huge company that could be unwieldy for another company to take on.

However, Brad Shimmin, an analyst with Current Analysis, said Yahoo doesn't have to sell to make a comeback. The board just needs to press ahead.

"If Yahoo! refocuses its energies upon current market opportunities such as social networking and mobility, it can, over time, relive its early success," he added. "But that will take time and patience from the board and investors. If an immediate turnaround is expected, then the sale of Yahoo! is the most expedient answer."

Independent industry analyst Jeff Kagan agreed that there's no need for Yahoo to be sold at this point.

"I actually think Yahoo is a strong, but tired, brand," said Kagan. "It needs refreshing and a new angle of attack. Google won the straight search business years ago, so Yahoo would have to reinvent its approach. Don't compete head-to-head with Google. Instead, come up with a new strategy.

"I don't think Yahoo has to be sold," he added. "I think they can become successful in their own niche or niches."

However, analysts generally agree that if Yahoo is sold, the board should avoid selling it off piecemeal.

"Though Yahoo! owns a number of highly independent and differentiated products, it should seek to remain a single entity," Shimmin said. "The only time a company should break apart is by government dictate, like with AT&T, or as a result of financial strife, like with Alcatel Lucent and Nortel."

Another issue could be price.

Rob Enderle, an analyst with the Enderle Group, noted that a big difficulty with any kind of sale would be the price. "Given the shape the company is in, it will be very difficult to get to a price that is agreeable to both sides," he said. "The company needs to be cleaned up and packaged before it will attract the kind of interest they might otherwise get."

So, who might be interested?

Several analysts said Microsoft, which made a play for Yahoo a few years ago, might still be interested in picking up the company to gain a bigger online platform. And since Yahoo and Microsoft already are teaming up on search and advertising, solidifying that partnership could make sense.

"I'm sure the Microsoft offer of $31 per share a few years ago is looking pretty good [to Yahoo] today," said Olds. "And Microsoft might still be interested in Yahoo - at a vastly lower price, that is. I don't know if there are any other players who have both the money and the desire to buy something as big as Yahoo."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at Twitter @sgaudin, on or subscribe to Sharon's RSS feed Gaudin RSS. Her e-mail address is sgaudin@computerworld.com.

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