Yahoo (YHOO) was hit hard this passing week, dropping over 6%. And I hope YHOO could drop more in the coming market correction because I'm accumulating its shares. The more it drops, the happier I will be. I think at this stage, Yahoo is a hidden gem in the market, waiting to be found. The time is probably just around the corner.
Independently Yahoo is probably a history, a past glory story. There is no way it can compete with Google as a search engine, although it is still the No 2 search engine in the world. Yahoo certainly understands its own status clearly and is doing everything to try to sell itself successfully.
Believe or not, Yahoo has a lot value in it. It has $2B cash with almost no debt. It has investments in Alibaba (China) and Yahoo Japan, which is worth about $18B in total. Yahoo is trying to sell these two assets, which to me is one critical step to make its own sale more attractive. The sales negotiation did not progress well last week, which caused its significant decline. But sooner or later, the sales will go through. The recent resignation of its founder, Jerry Yang, as well as other key board directors is another important step to make the way for sale. There are a lot of rumors out there about who may buy Yahoo. Microsoft has tried before but failed. This time around, the most likely acquirer may be Apple. Apple is already using some Yahoo's applications on its iPhone. Yahoo's search engine business & email service can also help Apple to further expand its business and bring more customers. More importantly, Yahoo has worked very hard for several years to developed its technology called Yahoo's TV Widgets, aiming to bring the Web to TV. You must have heard that the unfinished dream of Steve Jobs before his death was to develop iTV, which is basically a combo of TV and Internet. I think there is a great potential synergy if Apple can obtain Yahoo. So Yahoo acquired by Apple is not something out of blue. It can be a real deal. It it happens, I'm sure it will be an offer with a huge premium. Maybe at a price around $25 for Yahoo, a jump over 50% over its current stock price.
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