Yahoo’s Alabama windfall firepower to chase google

10:22 • 07.05.14
Economy

Marissa Mayer is finally set to get a cash infusion from Yahoo! Inc. (YHOO)’s nine-year investment in Alibaba Group Holding Ltd. -- along with the pressure of putting the money to work.


Yahoo is selling 208 million shares, or about 40 percent of its Alibaba stake, in the Chinese Internet company’s upcoming initial public offering, and could generate in excess of $10 billion in the process. That would more than double Yahoo’s cash stockpile.


Mayer, almost two years into a turnaround effort that’s failed to produce much sales or profit growth, must decide how to deploy the capital. She could return cash to shareholders through a buyback or dividend, or focus on expansion through acquisitions. Choosing wisely is critical, as the payout offers Mayer her best shot yet at narrowing the ever-widening gap between Yahoo and Web rivals Google Inc. (GOOG) and Facebook Inc.


“It gives her firepower to go buy companies,” said Colin Gillis, an analyst at BGC Partners, who has the equivalent of a hold rating on Yahoo. “What she does with the cash will define how effective of a manager she is.”


Yahoo could look at purchasing public companies including AOL Inc., which may help deliver sales growth, Gillis said. Mayer may also add to her string of startup acquisitions with Web companies that can generate more visitor traffic, he said.


Yahoo! Inc. Chief Executive Officer Marissa Mayer.

Sarah Meron, a spokeswoman for Yahoo, declined to comment, as did Caroline Campbell, a spokeswoman for AOL. 

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