Rumors have a habit of never transpiring, but when the NYT, The Times and TechCrunch all suggest that Yahoo may give up 25% of their stock, in exchange for full ownership of MySpace, we should probably sit up and take notice.
It’s somewhat hard to comprehend why Yahoo would give MySpace a value of around $12 billion, yet won’t cough-up a couple billion for the fast growing Facebook – perhaps MySpace’s broader appeal is the key to its valuation. Certainly, Fox Interactive would see a very nice return on investment for the $580 million they paid for MySpace, but why would they be so interested in an all stock deal with a company that only recently fired their CEO? Perhaps CEO Mr. Murdoch can shed some light on why he’d sell MySpace…
Asked whether newspaper readers were drifting off to MySpace, Mr Murdoch joked: ?I wish they were. They?re all going to Facebook at the moment.?
Well then, it seems like a good time to sell. Even if Yahoo’s stock declined by 50% before News Corp. could sell their stake, that’s still a $5+ billion ROI.
So, the next question is, why is Yahoo prepared to give up 25% of their company for a social network. Honestly? I have no idea, and I think that’s Yahoo’s biggest problem – they don’t know what they want to be, so how can anyone else know? Yahoo’s stalling stock, CEO departure, peanut butter memo and low employee moral can all be tied to the fact that Yahoo just doesn’t appear to know which direction to head. They’ve seemingly given up trying to compete with Google, yet haven’t really found an alternative niche to dominate.
As others have noted, the chances are low that this deal will go through, but if it does, you get the sense that this will be Yahoo’s last ditch attempt to find its purpose in life, or find someone willing to buy them out.