TechCrunch
Yahoo, Alibaba And Why Mayer Can Keep Buying Whatever She Wants
A quick glance at Yahoo’s balance sheet might have you worried: Only $1.14 billion in cash and equivalents, and the company just dropped $1.1 billion on Tumblr? It almost seems a bit profligate.
But happily for Yahoo investors, the company is not low on funds in the slightest. In fact, given its current balance sheet and asset pool, Yahoo is incredibly wealthy. That fact is ironically overshadowed by the simple truth that other tech firms are even richer. But hey, your $10 billion is someone else’s $50 billion.
This matters, as Yahoo is on a truly impressive acquisition spree, picking up 19 companies in the last year. Yahoo has been aggressively growing its internal cadre of mobile developers through aqui-hire, juicing its smartphone chops by agglomerating external teams to its own staff. Not all the purchases were large, but even modest acquisitions add up once you reach double digits.
If Yahoo intends to continue its mobile-first strategy, it will likely need to continue buying smaller companies. And to do that it needs cash. Let’s take a look at how much money Yahoo has.
During its video earnings call, Yahoo stated that it has $4.8 billion in cash and securities on hand. That essentially constitutes the money that it can use to acquire other firms. The $4.8 billion figure represents a decline of $600 million from the previous quarter in which Yahoo ended with $5.4 billion in cash and securities.
However, as its earnings statement notes, that $600 million is a cushioned decline:
[Cash] outflows were offset by $846 million in cash from Alibaba Group to redeem the Alibaba Group Preference Shares.
$800 million of that was the redemption of shares, with the remaining $46 million a form of dividend. That inflow of cash matters, as it dramatically lowered the decrease in Yahoo’s bucket of cash and marketable securities. Without the incoming $846 million, Yahoo lowered its reserves not by $600 million, but $1.446 billion, or what would have been 27 percent of its former quarter’s final balance.
That’s a much faster pace.
According to its balance sheet, Yahoo now owns no more Alibaba Group Preference Shares, meaning that it won’t be able to generate another $800 million in the current quarter from the sort of sale that helped it greatly in the now most recent quarter. So, is that a problem for the company? No.
When we discuss the long-term diminishment of Yahoo’s working funds, if it carries on as it did in the preceding quarter, we could forecast a material decline in its cash pool. The company, if it burned through its cash, could issue more shares, but that is the opposite of what Yahoo is currently working to do; the company is several billion dollars into a share repurchase program. You don’t spend billions buying shares off the public market only to issue more the next day. It’s a waste of time and money.
Therefore, barring some sort of mega purchase, the chance of Yahoo issuing a noticeable amount of stock — not, say, to its employees as a form of compensation — is nil. Therefore, excluding positive cash flow from operations, that $4.8 billion is all Yahoo has. That sounds dismissive, but compared to the hoards of Google, Microsoft and Apple, Yahoo is a relative pauper.
However, Yahoo retains another asset that doesn’t show up on its balance sheet the way you might expect, that is worth a multiple of its listed value, and will soon convert into a massive payout to Yahoo.
Thanks to an accounting system called the “equity method,” Yahoo doesn’t value its remaining 24 percent stake in Alibaba according to what its value would be in the market. Under the equity method, you can value certain stakes in other companies at non-market rates.
Alibaba intends to go public, and its CEO has recently stated it can do so whenever it wants. Also, a number of banks are raising their target valuation for Alibaba to $120 billion.
This is where the math becomes interesting. Twenty-four percent of $120 billion is $28.8 billion. Yahoo is worth, at current tally, just under $30 billion. Are investors therefore valuing Yahoo at essentially nothing more than its Alibaba stake? And if that stake is worth so much, how does that not affect Yahoo’s working funds?
Yahoo as a firm has obvious worth, so investors aren’t valuing it at zero. Instead, Yahoo values its Alibaba stake at all but nothing, at least in comparison to what its value may be when the Asian technology giant goes public. For example, in its first 2013 quarterly report, Yahoo stated that the value of its Alibaba stake was $453 million.
Here’s Yahoo itself on the valuation of its Alibaba equity:
The investment in Alibaba Group is being accounted for using the equity method, and the total investment, including net tangible assets, identifiable intangible assets, and goodwill, is classified as part of the investments in equity interests balance on the Company’s condensed consolidated balance sheets.
Therefore, for now at least, the real value of Alibaba is all but hidden from Yahoo’s books legally. Yet, Yahoo isn’t being tricky in this case; the equity method appears to be a very common form of accounting.
The question is now whether Yahoo intends to sell part of its Alibaba equity, unlocking its massive value, once the firm goes public. As it turns out, the company must. As the USA Today reported:
Yahoo owns just under 24% of the company, and is obligated to sell at least half of that based on a deal struck with Alibaba founder Jack Ma last year.
Therefore, assuming the $120 billion valuation for Alibaba, Yahoo will cash out $14.4 billion if it does sell the full half. Naturally, the taxes on that sale will be tectonic, but it will still shuttle billions into the firm in the form of cash.
Therefore, Yahoo’s current cash reserves are somewhat irrelevant, as they are more than high enough for the coming few quarters — barring four Tumblr-sized purchases — and by then Alibaba will have gone public.
So go crazy, Mayer. Your credit is good everywhere.
Top Image Credit: Luz Bratcher
Viber Attacked By Syrian Electronic Army
Viber has confirmed a situation earlier this morning in which Viber appeared to have been hacked by the Syrian Electronic Army (a pro-government group of computer hackers aligned with Syrian President Bashar al-Assad).
AppleSpot originally reported on the hack that affected the Viber support page, though it was unclear the extent to which hackers accessed Viber systems.
Viber has now clarified that the hack only allowed access to two minor systems, a customer support panel and a support administration system. According to the company’s official response, “no sensitive user data was exposed and Viber’s databases were not ‘hacked’.”
The company did not confirm whether the attack came from the Syrian Electronic Army, though the hacker group does take responsibility for the hack. Viber did, however, claim that the hack was the product of a phishing attack that was carried out against one of their employees.
Here’s the official statement:
Today the Viber Support site was defaced after a Viber employee unfortunately fell victim to an email phishing attack. The phishing attack allowed access to two minor systems: a customer support panel and a support administration system. Information from one of these systems was posted on the defaced page.
It is very important to emphasize that no sensitive user data was exposed and that Viber’s databases were not “hacked”. Sensitive, private user information is kept in a secure system that cannot be accessed through this type of attack and is not part of our support system.
We take this incident very seriously and we are working right now to return the support site to full service for our users. Additionally, we want to assure all of our users that we are reviewing all of our policies to make sure that no such incident is repeated in the future.
The hack took down the Viber support page, and replaced it with the following message and a screenshot of the hack.
Dear All Viber Users,
The Israeli-based “Viber” is spying and tracking you
We weren’t able to hack all Viber systems, but most of it is designed for spying and tracking
The above screenshot (within the screenshot) was meant to act as proof that the hackers did in fact access Viber’s databases. We also looked at their released files to confirm their claims (second screenshot).
As you can see, the hackers were able to access information such as phone number, UDID, country, IP address, device type, OS OS type, OS version, registration date, most recent update, and push token.
Viber also took the opportunity to respond to accusations of spying:
Viber, like many other companies such as Microsoft, Cisco, Google, and Intel maintains a development center in Israel. It seems like this caused some people to come up with some pretty bizarre conspiracy theories.
It goes without saying, that these claims are completely without merit, and have no basis in reality whatsoever.
Viber is a free messaging and calling service based out of Israel with over 200 million users globally.
We will continue to update this story as more information becomes available.
Twitter's One-Two Punch Now Lets All US Advertisers Target People Who Just Saw Their TV Commercials
Hit ‘em with a television commercial, then with a Twitter ad to really drive the message home. That’s the promise of Twitter’s TV Ad Targeting it’s rolling out to all US advertisers today after its beta launch in May. Twitter’s Nielsen studies say the combo deliver 95% stronger message association and 58% higher purchase intent than TV ads alone.
Twitter’s also hooking up advertisers with an improved analytics dashboard that pulls in what users are saying about their ad campaigns. That could help businesses refine their ads for maximum impact and retweetability.
Here’s how the Twitter TV Ad Targeting system works.
Say Nike runs a TV commercial campaign for its new Air Jordans across several shows and networks. Twitter tracks exactly when the ads are shown and on what programs. It then looks for people tweeting about those shows by naming or mentioning the show, or using the right hashtag — people that are likely to have seen the Nike commercial. Twitter TV Ad Targeting lets advertisers target these people with Twitter Promoted Tweets ads that show up in their stream. Those could include pure text tweets reinforcing the commercial, a link they can follow to learn more or make a purchase, or even a Vine to give viewers a second dose of video marketing.
The new ad tech is based on BlueFin Labs, a TV analytics service Twitter acquired in February. BlueFin’s co-founder Michael Fleischman says that its video fingerprinting tech lets Twitter automatically detect when a TV commercials airs so brands don’t have to give Twitter a heads up. That means these ads can easily complement existing TV campaigns without a ton of work.
Now Twitter isn’t the only place people are talking about TV. Trendrr today put out a study in partnership with Facebook saying that despite the widely held belief that Twitter rules real-time chatter, Facebook sees five times as much TV-related social activity as all other social networks combined, including Twitter. Trendrr was given special access to the data by Facebook, so it should be taken with some salt. The study also tallies Facebook Likes and comments as well as posts and shares, which don’t exactly match up to @ replies and favorites…if those Twitter feedback activities were even properly counted. It’s important to know whether Trendrr’s data treated Twitter fairly, so I’ll be talking to Trendrr shortly about methodology.
Of course Facebook has five times as many users as Twitter, so it’s not necessarily doing TV chatter better, it’s just bigger. Also, if Facebook does have more chatter, it’s not taking as strong of advantage of it as Twitter is here. Facebook has been publicly focusing its advertising efforts around retargeting and matching offline purchase data to users. Meanwhile, Twitter seems to be making big advances in semantic recognition of what people are talking about and how that can target ads. This could let it appeal to brands with big TV ad budgets that might be apprehensive about Facebook’s new-fangled ad services.
Tell me once, and I’ll forget. Tell me twice and I might keep your brand in mind the next time I’m shopping. If used creatively, Twitter’s targeting could let businesses create a marketing narrative that tells a deeper, more interactive story than a commercial locked inside your TV can. Twitter can’t be 100% positive you weren’t in the bathroom or making a sandwich while the TV commercial aired, but it’s sure enough to be able to sell the targeting and directly monetize its place as a home for discussion of real-time events.
Keen On… The Women Question: Why Are There So Few Female Startup Entrepreneurs?
Last week, L’Oreal awarded their annual Next Generation Awards to three dynamic young female entrepreneurs who are shaking up the cosmetics industry: Sukhinder Singh Cassidy, Founder & CEO of Joyus; Kelsey Falter, Founder & CEO of Poptip; and Heather Marie, Founder & CEO of 72Lux. But why, I asked these three young women over Skype, are there so few female startup entrepreneurs? And what would they do to make things fairer for women who want to get into tech? While their answers are anything but uniform, these opinions – like L’Oreal’s Next Generation Awards themselves – are an important contribution to making the startup community friendlier to female entrepreneurs.
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