Web giant is smarting over spinoff of Alibaba Group's payment division

SAN FRANCISCO -Yahoo Inc CEO Carol Bartz found herself in a familiar position on, assuring stock market analysts that she will clean up a mess damaging the long-slumping Internet company's market value.

The latest challenge to confront Bartz in her nearly 2 1/2 year tenure emerged two weeks ago. That's when Yahoo jarred investors by informing them of an abrupt change affecting the value of its 43 percent stake in Alibaba Group, one of the leaders in China's rapidly growing Internet market.

Alibaba had spun off a potential jewel - its online payment service Alipay.com - into a separate company controlled by its CEO, Jack Ma, without giving Yahoo anything in return.

Yahoo's stock price has plunged by 12 percent since the May 10 revelation, leaving Bartz little choice but to place the issue at the top of the agenda for a meeting that the company had scheduled to provide an update on its turnaround strategy. The Associated Press monitored the San Jose, California, meeting through a webcast because Yahoo wouldn't allow reporters to attend.

Although she provided few specifics, Bartz spent most of the first hour trying to reassure analysts that Yahoo will be "appropriately compensated" for the loss of Alipay from its investment portfolio.

Bartz made her points flanked by Yahoo's chief financial officer, Tim Morse, and company co-founder, Jerry Yang, who also is a member of Alibaba's board of directors. Both men flew to Asia last week to discuss the Alipay matter with Alibaba's major shareholders, which include Ma and Japan's Softbank Corp. Bartz said all the key shareholders have committed to negotiating a fair payment for the Alipay spinoff and preserving the value of another Alibaba asset, the online auction site Taobao.com.

"This is a very complex situation," Bartz said. "We have approached this thoughtfully and methodically. We think this is the right path to protect shareholder interests."

Bartz wouldn't predict when the Alipay issue would be resolved.

Yahoo said Alibaba notified it about the change in Alipay's ownership on March 31. None of the executives explained why Yahoo waited nearly six weeks to disclose the news.

"We believe our disclosure was timely and appropriate," Bartz said.

Later in the day, Morse said Yahoo is still exploring ways to enable shareholders to get their money out of another closely watched Asian investment, Yahoo Japan Corp. As has been the case since last year, Yahoo is still considering spinning off its 35 percent stake in Yahoo Japan or transferring the holdings into a tracking stock.

"We are pursuing some attractive alternatives, but it's not a quick and easy process," Morse said of the Yahoo Japan situation.

Investors seemed largely unmoved by what they heard Wednesday. Yahoo shares closed at $16.15.

Bartz and her top lieutenants spent most the meeting trying to show that Yahoo is finally headed in the right direction after years of misguided decisions and aimless execution.

The bumbling has undercut the company's revenue and stock price at a time when other major Internet companies such as Google Inc, Amazon.com Inc and Facebook.com are thriving.

"We have rolled up our sleeves and we have done the hard work that Yahoo needed to do to be positioned as a premier digital media company," Bartz said on Wednesday.

Yahoo remains one of the Internet's top destinations with more than 600 million users, an audience that Bartz boasted would be the envy of once-powerful media barons such as the newspaper publisher William Randolph Hearst.

But Yahoo's popularity hasn't carried over into the stock market, largely because the company has been stuck in a financial malaise for most of the past five years. During that time, Yahoo has lost nearly half of its market value under three different CEOs -Bartz, Yang and the former movie studio boss Terry Semel.

Although Bartz has been able to boost Yahoo's earnings by trimming about $2.1 billion in costs, the company isn't keeping pace with the growth in the Internet advertising market that generates most of its revenue.

Associated Press

(China Daily 05/27/2011 page17)