As Yahoo gears up for its fourth-quarter earnings on Tuesday, shareholders are less focused on the struggling Internet company's results than an update to an expected sale of its Asian assets.
The sale would bring a cash infusion to investors looking to be rewarded for holding onto Yahoo , whose core display advertising business has faltered amid management shuffles and heated competition.
"What happens to the core Yahoo business is less important to shareholders as the vast majority of the company is in the Asian assets," said Ryan Jacob, lead manager of the Jacob Internet Fund, which counts Yahoo as one of its largest holdings. "If the earnings results are terrible but they've announced a definitive plan and a price for which they're selling the assets, the stock will invariably do well."
Yahoo has been under pressure to divest its stakes in two Asian companies worth a reported $17 billion as a way to return cash to shareholders and to concentrate on its core U.S. business.
The company owns a 40 percent stake in Chinese e-commerce giant Alibaba as well as a 35 percent chunk of Yahoo Japan.
It's more likely that Yahoo will look only to shed its Asian assets rather than pursue an outright sale of the entire company due to the recent appointment of new CEO Scott Thompson, said one shareholder who didn't want to be named, citing firm policy.
Hiring Thompson is likely a sign Yahoo is looking to keep the company intact, he said.
Yahoo began to entertain a plan to split off its Asian assets following earlier proposals by private-equity firms to buy a minority stake in the Internet firm.
Such plans were opposed by large shareholders, including hedge fund manager Dan Loeb of Third Point.
Yahoo's Asian assets are likely worth $15 to $17 a share, said shareholder David Post, the principal managing director at Llenroc Capital, while the company's core business is worth around $7. Shareholders are also hoping that the company will re-evaluate its board on Feb. 24 when new directors can be nominated.
"I can only think of a few examples where a board of directors did more disservice and behaved in a more questionable way with respect to their obligations to shareholders," said a second shareholder who didn't want to be named because he isn't authorized to speak on behalf of his firm. "This is not the picture of a growth company."
Yahoo has struggled to keep up with Google and Facebook particularly in the display advertising business, an area where the company hasn't grown as quickly as its rivals despite an increase in the overall U.S. online ad industry.
Despite skepticism from some shareholders, others are more optimistic about Yahoo's future.
"If I were a Silicon Valley CEO at a poker table and someone dealt me Yahoo's hand, I'd think I was dealt a pretty good hand," said Adam Seessel, director of research at Marin Capital Management. "They have a lot of people visiting their site every month, and someone like Scott Thompson ought to be able to figure out how to monetize those eyeballs."
Analysts are expecting earnings of 24 cents per share on revenue of $1.19 billion for the quarter. Shares of Yahoo closed down 1.7 percent Monday to $15.68.
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