Yahoo: CEO Marissa Mayer presides over a company worth zero
Yahoo: CEO Marissa Mayer presides over a company worth zero
A view from Andrew Pemberton

Why it's time to put Yahoo on the block

CEO Marissa Mayer presides over Yahoo's burning platform, and there's only one way off, writes Andrew Pemberton, director of Furthr.

There is a saying about Yahoo.

If they are buying your start-up, two things are about to happen.

Firstly, you are about to become very rich.

Secondly, your company is about to go down the dumper.

Just ask husband-and-wife development team Stewart Butterfield and Caterina Fake over at doomed photo-sharing site Flickr.

Once Flickr was the first biggest and best photo-sharing site on the web. Then it was bought by Yahoo in 2005 for $35m.

After two years, the "need" to "integrate" with the digital behemoth Yahoo caused Flickr to stop innovating, so it keeled over and died.

Many articles were written about that deal and how it went sour, but I’ll save you the pain of reading them and instead give you the gist: integration is the enemy of innovation. Remember that lesson. Yahoo did. They swore they’d never do it again.

Now, it’s 2016 and guess what? It’s happening again. This time, it’s Tumblr’s turn.

What's in store for Tumblr?

In one of her biggest deals, Yahoo CEO Marissa Mayer bought Tumblr in 2013 for $990m. A big part of that deal was a goodwill payment of $750m. The goodwill payment was a load of extra cash beyond what the numbers said the social media platform was worth, just because Tumblr was very cool and Yahoo wasn’t very cool anymore.

Now Yahoo have let slip they are about to write off that payment. The reason for the write down was given as "smaller market share, slower revenue growth and cash flow". Specifically, Tumblr failed to reach its 2015 revenue target of $100m.

The reason for the sales shortfall? Yahoo's decision to "integrate" Tumblr's sales team with the rest of the company. That word again. It didn't go too well and Yahoo is now unwinding the two sales teams.

But insiders say Tumblr is not doomed like Flickr is doomed.  Its revenue is still growing and Yahoo still thought it was important enough to give it a big-up in a recent company report.

But how do things look for Yahoo? Not so peachy.

The fact that they could write off the entire goodwill payment is whopping great admission of failure for CEO Marissa Mayer.

But it’s hardly her first. Back in November 2015, Yahoo's market capitalization was $31.1bn. If you subtract Yahoo's valuable stake in Alibaba (worth around $28bn) - which Yahoo acquired in 2005 before Mayer's tenure began - and its stake in Yahoo Japan (worth around $7.9bn), the core service that Ms Mayer is responsible for has an enterprise value of -$4.8bn.

That's right. According to the market, the company she presides over is worth less than zero.

No wonder the once-mighty internet firm is considering selling off up to $3bn in "non-core" assets including patents and real estate. (Time and Verizon are among the potential buyers.)

Marissa Mayer has failed to turn Yahoo around. Should she be sacked? Yes, and Yahoo should be sold.

If Mayer is fired, her severance package is estimated to be worth around $100m. Not bad pay for taking a failing internet giant and making it fail some more.