Jerry Yang faces some tough decisions only a few days after following departed Terry Semel in his role as Yahoo! chief executive. Rumours have abounded that MySpace-owner News Corp is in talks with Yahoo! about a possible swap of the social network website for a substantial stake in Yahoo! shares. The first report, which appeared in the business section of The Times, said News Corp had asked for a 30 per cent stake in the internet giant Yahoo!. Later, other reports said the Rupert Murdoch owned News Corp had asked for a 25 per cent share. The Times is also owned by News Corp. Yahoo! have so far not commented on the deal.
After the news appeared, Yahoo! shares rose moderately, while News Corp shares went down a few pence on Wednesday. For New York based company News Corp, who bought MySpace for a mere 580 million dollars in 2005, the Yahoo! deal would mean a heavy return on investment - whether sold for 25 per cent or 30 per cent of Yahoo! shares.
Based on its current value in the stock market, Yahoo! is worth around 37 billion dollars. That would make 30 per cent of Yahoo! equal over $11 billion, while 25 per cent would be valued at around $9.3 billion. But is it really a bad deal for Yahoo!?
After years of rising share value, Yahoo! profits had fallen 11 per cent since last year, with the internet giant losing ground to rival Google in both the search business and the online advertising market. During the same period, Google's shares rose by 34 per cent. MySpace could prove helpful in Yahoo's attempt to win back market share against the internet search market leader.
MySpace is the most popular social networking site on the web, where users can share photos, journals and interests with a network of other users. Its market dominance has recently come under increasing pressure through rival social networking site Facebook, whose visits were reported to grow by 90 per cent in two months. In 2006, Facebook founder Mark Zuckerberg turned down a $1.6 billion offer made by Yahoo!.
Apart from MySpace, News Corp are reported to also have offered other internet properties to Yahoo!, such as multimedia news and reviews website IGN. Adding MySpace and News Corp.'s vast media resources could be very helpful in Yahoo!'s attempt to make a comeback with a new chief at the helm.
