I had received a fairly reliable tip a couple of weeks ago that Yahoo was in talks to buy Foursquare. The conventional wisdom is that new Yahoo CEO Marissa Mayer is seeking a meaningful acquisition to mark the beginning of her tenure and give the company some new energy and momentum. Foursquare, given that it straddles social, local and mobile, is a logical choice.
My article sparked a discussion on Twitter about the “true value” of Foursquare. Foursquare was valued at roughly $600 million after its last funding round. But some people are quite skeptical that it’s worth anything like that.
In my article I speculated that an acquisition price would be at least several hundred million up to $1 billion for Foursquare. However Yahoo’s decision today to return most of the proceeds of the sale of half of its stake in Alibaba to shareholders suggests that no such major acquisition (i.e., Foursquare) is coming.
The more than $7 billion sale will net Yahoo about $4.3 billion after taxes. Of that Marissa Mayer said late today (via an internal company memo) that $3.65 billion will be returned to shareholders and Yahoo would keep “a meaningful amount in the company to invest in our future.” That turns out to be about $650 million.
Yahoo’s cash on hand at the end of Q2 was just under $2 billion. That would mean Yahoo now has something like $2.5 billion in cash on hand or cash equivalents. Google has $15 billion in the bank. And of course Apple has something like $120 billion in cash.
Beyond the idea of appeasing shareholders and/or making good on earlier promises the decision to “give back” most of the money could be a reflection of the collapse of talks with Foursquare (pure conjecture on my part) or reflect that Foursquare is simply too expensive for Yahoo at this point.
What are your thoughts? Do you agree with my conjecture?
Do you still think there will be a significant Yahoo acquisition in the near term? If so, what company now is a good candidate?
There are certainly lots of lesser-known startups that could bolster Yahoo in terms of functionality and/or personnel — but they won’t make the kind of splash that buying Foursquare would have.