With a new CEO at the helm, Yahoo’s plans for the $4 billion it gained with the sale of Alibaba may be changing. This is good news for new talent, but bad news for shareholders.
In May, Yahoo announced that the $4 billion it received from selling 20 percent of its stake in its Chinese assets would go to the shareholders. In early August Marissa Mayer, the company’s brand-new CEO, indicated she may have other plans for the funds as she seeks to implement her growth plan for Yahoo. This could mean that Yahoo, with its existing $2 billion in cash, could have $6 billion with which to hire new talent.
Careful Review Leading to Drastic Changes
When she came on board as CEO three weeks ago, Ms. Mayer began a careful review of the company’s strategy and existing assets. What she found is that the company is struggling.
The 2011 year ended with a 21 percent decline in revenue, according to Voice&Data. When she took her position as CEO, Mayer had approximately $2 billion in cash to work with. An honest look at where Yahoo stands and her own goals for the future led Mayer to reverse the company’s earlier decision about the $4 billion coming from Alibaba.
While $2 billion may seem like a sufficient amount to revive the company, Mayer felt it was not. Because the company is competing with big names like Microsoft, Google and Apple, they need more than this to get the talent on board that Mayer believes she needs to make Yahoo a success. Thus, the $4 billion promised to stakeholders may be retained for a new purpose.
Mayer Actively Seeking Talent and Acquisitions
While Yahoo’s statement earlier in August only hinted that the money might be used in other ways, Mayer’s actions seem to indicate it to be fact. A key component of her strategy will be to hire new talent for the struggling company. Almost immediately after coming on board, she has been actively in the field, looking for up and coming players and entrepreneurs that could become assets. For those who have the type of talent Yahoo needs, this $4 billion boost to the hiring budget could be a godsend.
Hiring new talent is not the only plan for these funds, according to All Things D. Mayer has also been eyeing potential acquisitions. Among those analysts believe may be in her sights are Pinterest, Zynga, Yelp and Foursquare. A tech move also seems eminent. Specifically, she may be looking to invest in the company’s advertising technology to bring Yahoo back to what it was in years past.
While stockholders may not be happy with these new plans, The Wall Street Journal reports that stock analysts see some benefit. In order to create a growth strategy, Mark Mahaney of Citigroup says that a company needs to have a sizeable amount of cash on hand. By reversing the Alibaba decision, Mayer may have just bought Yahoo the time and resources it needs to grow to greatness again.