Core Yahoo is worth less than its own acquisitions

If the market is right, Yahoo has a funny way of erasing value.

Even with more than $30 billion in ownership of Alibaba and Yahoo Japan, the market is valuing the full company at about $28 billion as of earlier this week. If we factor out those stakes (after taxes) and the company's cash, the core of the company is apparently only worth a little over $1 billion.

That's strange enough math when considering only the resale value of Alibaba and Yahoo Japan, but what about all the other companies that have been absorbed by Yahoo over the years? Since 1997, there have been more than 120 smaller companies that Yahoo acquired to fuel Yahoo's growth.

The company's reported transactions were purchased for a total of about $17 billion, and it divested about $1 billion, meaning that Yahoo gobbled up about $16 billion in new ideas and fresh talent without much apparent gain. And that's not even counting the acquisitions without reported transaction costs.

To be sure, Yahoo's core is surely worth more than the value currently assigned to it by the market. After all, Verizon bought AOL for $4.4 billion just last year, or about eight times earnings before interest, taxes, depreciation and amortization. At a similar ratio, Yahoo's core business would be worth about $6 billion or $7 billion. But even at that generous valuation, $10 billion in company value has been destroyed.

Where did that value go? Well, some of the companies Yahoo has purchased over the years were simply bad deals. Mark Cuban's, which was purchased for billions right before the dot com bubble burst, is probably one of those. Others may have contributed to the company but not enough to make a difference in Yahoo's deterioration.

CEO Marissa Mayer, who took control in July 2012, is responsible for only about 15 percent of those acquisitions, including the $1.1 billion purchase of Tumblr, which appears to be operating under a very light touch from Yahoo. Under Mayer's tenure, Yahoo has spent at least $2.5 billion on material acquisitions and sold $670 million — a basket of properties that are collectively a lot closer to the company's likely core value.

"Most of these deals were done long before Marissa got to the company, and it certainly makes little sense to evaluate her performance based on deals that were closed years before she came," said a spokesman for the company. "It's not the same set of people who did these deals."

Yahoo has faced a different set of challenges than a newer company like Alphabet, which has seen its value grow at a rate that far outweighs the 190 acquisitions it has made since its 2004 initial public offering. Microsoft, which has been around a lot longer, has purchased about $60 billion in other companies and has a market value of $409 billion. Here's how Yahoo's total acquisition transactions stack up as a percentage of total market value (including the value of its Alibaba stake):

Referring to Yahoo's attempts to bolster its bottom line through acquisitions and other spending, analyst Robert Peck said: "I don't know if I can think of a company that has spent that much capital to have it be that unproductive."

Peck, managing director of Internet equity research at SunTrust Robinson Humphrey, said that while years of bad decision-making at Yahoo could have a real impact on the company's employee morale and culture, Mayer's team has had nearly four years to turn things around. Yet quarterly revenue was down 15 percent, Yahoo reported earlier this month, and it appears to have plenty of ongoing advertising issues.

"Four years is a long time to show any sort of traction," said Peck. "And now not only do you not show traction, you show accelerating degradation."

While Peck considers the 2014 purchase of mobile analytics firm Flurry a good acquisition, it's not clear that some of the other companies Yahoo opened its wallet for recently — like programmatic advertising company BrightRoll and Tumblr — will pay off. In Peck's view, it's inevitable that the company will have to sell off its core, and the sooner the better.

"It's a melting ice cube," he said. "It's important that they move quickly."

Disclosure: CNBC has a content-sharing agreement with Yahoo's finance site.