Yahoo was once a household name known for it search engine and email services. Today, Google has more than 50 percent market share in the search engine business, and Yahoo has become increasingly irrelevant. Over the past ten years, Google has innovated by developing the most popular smartphone platform in the world, which acts as a platform for users to use its core search and services, while Yahoo has stagnated by not introducing any new services. As a company, Yahoo has failed to realize competitive advantages can no longer by expected to be sustainable, especially in the rapidly changing IT industry.

However, Yahoo has a card up its sleeves, its large share in Alibaba and Yahoo Japan, which are worth 30 billion and 11 billion respectively. Together, these shares are worth more than Yahoo, meaning that Yahoo’s core business, search, is worth nothing. An important question is whether Yahoo can sustain itself off the rising share prices of Alibaba and Yahoo Japan. Under agreement, Yahoo is required to sell a significant stake in Alibaba now that Alibaba has gone public. This means that Yahoo’s share price will be less affected by Alibaba. In addition, now that Alibaba has gone public, Yahoo’s shares could fall as stockholders sell and buy Alibaba shares directly. Although Yahoo bought many start ups such as Tumblr in the last few years, it has failed to turn these investments into revenue. If Yahoo is to stay relevant, it must use its investments to help revive its core search business.

Links: http://www.bloombergview.com/articles/2014-03-17/is-yahoo-s-business-worth-less-than-nothing

http://www.businessweek.com/articles/2013-10-16/how-much-is-yahoo-worth-without-alibaba-not-much