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Yahoo-Alibaba Deal Is Awful, but No One Expected Better From Bartz

It must be tough for CEO Carol Bartz to run Yahoo (YHOO) when it owes a large percentage of its market value to a 43 percent stake in Alibaba Group, a big Chinese e-commerce company. And it must be tougher when Alibaba spins off Alipay, an important online payment subsidiary, to its own chairman, supposedly without telling Yahoo, to keep Chinese regulators happy. So you'd think that life would be much better when the two companies settled their fight.

Not quite. The deal was pretty terrible -- analysts gave the deal mixed reviews and Yahoo shares still dropped a few percent.

Boy, did that hurt
The bad side was that Yahoo got screwed, as Dough Anmuth of JP Morgan more politely put it. Yahoo owned 43 percent of Alibaba, which owned all of Alipay, which is China's equivalent of PayPal (EBAY). But the deal now leaves Alibaba with effectively 38 percent of Alipay.

That means Yahoo went from owning 43 percent of Alipay to just over 16 percent. There's also a cap on what Yahoo gets if Alibaba has an IPO.

Yahoo's performance continues to sink and Bartz seems incapable after more than two years of steering the company into regeneration and growth. So why didn't the stock drop more? Because no one expects Bartz to do any better.

Don't let the door hit you on the way out
It's only a matter of time before Bartz must hit the road. But who would Yahoo get to be CEO? This is a heavily damaged company with indifferent prospects, which seems absurd given the number of consumers who regularly go to the site, now the second most popular on the Web after Google (GOOG)

No one would pay the kind of money that investors would want for an acquisition -- certainly nowhere near the tens of billions that Microsoft (MSFT) once offered. Maybe it's time for the board to admit that it has been incapable of providing the necessary oversight and either make room for a new board and CEO or, seeing that few would want the job, maybe break up Yahoo into parts and sell it off.


Image: Flickr user Yodel Anecdotal, CC 2.0.
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