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Alibaba spin-off will increase scrutiny on Yahoo! turnaround efforts

SAN FRANCISCO – Yahoo! chief executive Marissa Mayer is losing a precious security blanket now that she is spinning off the Internet company’s prized ownership in China’s Alibaba Group.

SAN FRANCISCO – Yahoo! chief executive Marissa Mayer is losing a precious security blanket now that she is spinning off the Internet company’s prized ownership in China’s Alibaba Group.

The break-up announced on Tuesday will see Yahoo! transfer its 15.4 per cent stake worth US$39 billion (S$52.7 billion) in the e-commerce giant into a new entity called SpinCo. Those holdings, part of an astute investment made nearly a decade ago, represent the main reason that Yahoo!’s stock has more than tripled since Ms Mayer became CEO two-and-a-half years ago. But the spotlight now turns to her plans to rejuvenate one of the Internet’s oldest and best-known companies.

Before, as long as there was a link to Alibaba, it almost did not matter that Yahoo!’s own digital services had struggled with declining revenue, as advertisers and Internet users switched their money and attention to flashier, more innovative services from competitors such as Google, Facebook and Twitter.

“It’s not going to be easy from now on,” said B Riley and Co analyst Sameet Sinha. “She has to perform now. There’s nothing shielding her.”

By exiting the Alibaba stake, Ms Mayer will no longer have the cover provided by owning part of China’s biggest online marketplace. While she has made acquisitions, restructured the company and taken steps to boost the appeal of Yahoo!’s products, she will now have to start delivering tangible results.

“Now the core business is in focus,” said Mr Sinha. “She was distracted with all this deal-making. So you did that, good job. Let’s move on.”

She will need to extract more revenue from new businesses, including mobile and video, while making sure that Yahoo! benefits from demand for search services, Mr Sinha and other analysts said.

Fresh evidence of the challenges facing Ms Mayer emerged on Tuesday with the release of Yahoo!’s fourth-quarter results. Earnings fell 52 per cent from last year while revenue dipped 1 per cent. It marks the eighth time in her 10 quarters as CEO that the company’s revenue has declined from the previous year.

Yahoo!’s problems largely stem from its inability to adapt to the declining use of banner ads as more people spent their free time gazing into the smaller screens of smartphones and tablets instead of desktop and laptop computers. Analysts credit Ms Mayer for overhauling Yahoo!’s mobile apps and sharpening the focus on smartphones and tablets, but it still has not been enough.

After subtracting commissions, Yahoo!’s display ad revenue declined 5 per cent from the previous year in the fourth quarter. Advertising tied to Internet search results — a bright spot in recent quarters — barely budged from the previous year at US$462 million in the fourth quarter.

Ms Mayer, who built her reputation overseeing Google’s Internet search business, said Yahoo! remained committed to search. The company is discussing changes to its 10-year search partnership with Microsoft, which is at the midway mark. In November, Yahoo! struck a deal to displace Google as the default search service on Mozilla’s Firefox Web browser, which accounts for 3 to 5 per cent of searches.

She also said Yahoo! would seek to replace Google as the default search engine on Apple’s Safari browser. “We are all here to return an iconic company to greatness,” she said of her vision for Yahoo!. AGENCIES

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