Yahoo sold for knockdown price

Yahoo's core assets have been sold to US telco Verizon Wireless in a $US4.8 billion deal, according to a Wall Street Journal report.

The sale is due to be announced tomorrow. The price represents around 1x revenue for the money-losing internet company.

It includes Yahoo's core business and its real estate assets and some intellectual property but not the company's stake in China's Alibaba, which accounts for most of Yahoo's present market cap.

Yahoo NZ is run out of Sydney but does still garners a decent whack of traffic (Nielsen gives it 1.2 million monthly users) in part because it hosts Spark's YahooXtra mail service, which has at times been hit by security and spam issues (YahooXtra Mail is the legacy of what was once a broader partnership). The local content team was cleaned out last year.

At the height of the 1990s Dotcom boom, when portals were regarded as The Next Big Thing, Yahoo's market capitalisation hit $US125 billion.

In 2008, co-founder and then-chief executive Jerry Yang turned down a $US45 billion takeover offer from Microsoft, representing a 62% premium on its share price.

Ironically, Microsoft was said to be in the running this time around, too, though with a bid reportedly under $US5 billion.

In recent years, ex-Google exec Marissa Mayer has led an energetic attempt at a turnaround. But like her predecessors, she has been unable to answer the question: Why Yahoo?

Mr Yang and David Filo founded Yahoo in 1995 as an index of the internet's websites. At the time, there was nothing like it. But soon the number of sites proliferated well beyond what could be catalogued. Google stole a march on search, and Yahoo's own efforts in that highly-profitable area never caught up.

Today, Yahoo offers some commodity news, some basic finance data, some trivial, weather, horoscopes and some free on-demand video from media partners like Seven in Australia. Like the equally aimless MSN, it's a mish-mash without a mission. It attracts a mass audience but has never found a way to financially exploit in a world where online ad yields are thankless and falling and Google has an unassailable lead in search.

Yahoo lost money in each of the past five quarters on revenue that hovered around the $US1.2 to $US1.3 billion mark.

Its pending fire sale is expected to be Ms Mayer's final act as chief executive.

It's easy to see why Microsoft gave the company a swerve this time around, harder to grasp where Verizon saw appeal.Last year, Verizon bought AOL for $US4.4 billion — a purchase that also confounded pundits.The company formerly known as Telecom tried to use free versions of various "pro" Yahoo services as a value-add, but with so many web mail, online storage and photo sharing services being offered for free, it was not a strategy that gained any traction (unlike the blunt success of "xtra" email address that customers are loath to lose if they switch ISPs).

POSTSCRIPT

Verizon's Yahoo purchase gives it a second element in common with Spark. The US telco owns a minority stake in the Southern Cross Cable. And when Verizon was still known as Bell Atlantic, it had a major stake in the company then known as Telecom post-privatisation.