Renewed talk of Yahoo as acquisition target after Alibaba IPO

With Alibaba's IPO making big winners of the Chinese e-commerce giant and Japan-based stakeholder SoftBank, what are the odds that one of them buys Yahoo?

Richard Nieva Former senior reporter
Richard Nieva was a senior reporter for CNET News, focusing on Google and Yahoo. He previously worked for PandoDaily and Fortune Magazine, and his writing has appeared in The New York Times, on CNNMoney.com and on CJR.org.
Richard Nieva
3 min read

Alibaba -- founded by Jack Ma, who's now the richest man in China -- and Japanese telecom company SoftBank didn't rule out the possibility of buying Yahoo. Getty Images

Alibaba's massive initial public offering on Friday has rekindled rumors that Yahoo may soon become an acquisition target.

The Chinese e-commerce giant raised $21.8 billion in what ranks as the largest tech IPO ever. Yahoo stands to make $8.27 billion from the IPO, thanks to a 22.6 percent stake in Alibaba that the company had coming into Friday. Yahoo still retains a more than 16 percent stake, valued at more than $37 billion at the start of trading Friday.

While those are hefty sums, Alibaba is clearly the headliner -- its co-founder and executive chairman, Jack Ma, has just become the richest man in China, with a net worth of about $16 billion, according to Forbes. The other big winner is Japanese telecommunications company Softbank, which holds a roughly 19 percent stake. Softbank's investment is, as of Friday, worth more than $50 billion.

Flushed with cash, what could those companies do with the new capital? When asked on the New York Stock Exchange floor Friday about either of their companies considering buying Yahoo, neither of the executives ruled out the possibility to Bloomberg TV.

"I don't know if they would sell," said Ma, laughing. "I think the very important thing is that we want to build up a company, not buying company," added Ma, who has a slight accent. "We want to make sure that our ecosystem helps the small guys. Anything that can help the small business grow we will consider."

"That is a dangerous question," SoftBank CEO Masayoshi Son said in a separate interview, also laughing.

The comments underscore a common refrain in the tech industry regarding Yahoo's fate -- either as acquired or acquirer. In July, there were rumors about a possible merger between Yahoo and AOL, a pair-up that's been tossed around since former CEO Carol Bartz was in charge in 2008. Though it's struggling, Yahoo has assets and scale that could make it attractive to a possible buyer.

In a statement, Yahoo declined to comment specifically on the talk of an acquisition, but it congratulated Alibaba. "Yahoo has enjoyed a nine year relationship with Alibaba, and we remain major investors in the company," said Yahoo CEO Marissa Mayer. "We'd also like to thank our co-founder, Jerry Yang, for identifying and pursuing this wise investment."

Mayer took the job in 2012 in an attempt to turn around the ailing brand. During her tenure, she's been able to burnish the company with new excitement -- a not insignificant achievement given Yahoo's mediocre financial performance over the past decade. Under Mayer's regime, Yahoo has also bought more than 40 Internet-based companies -- including the $1 billion acquisition of the popular blogging platform Tumblr.

Still, the company's revenues remain flat. What's more, Yahoo's clout in the digital advertising world continues to dwindle. For instance, last quarter, the company's display-ad revenue -- an important financial metric -- slumped 7 percent. Yahoo's shares ended the day down 2.74 percent, while Alibaba's shares popped more than 38 percent.

With the windfall from the Alibaba proceeds, Mayer will have the resources to try to jolt Yahoo's core products and advertising business. The company has already committed to returning at least half the proceeds to shareholders, but after that, Mayer will also have the flexibility to make major operating decisions. That includes continuing the trend of buying smaller companies for their teams or technology, or making another splashy buy like Tumblr.

Rating the odds of getting bought by another company, Scott Kessler, an equity analyst at S&P Capital IQ, thinks it's just one of several possible moves that could be made in the aftermath of Alibaba's IPO.

"Anything is possible," he said. "Including that."