SpinCo: Yahoo Bails Out on Its Small Business Division

Yahoo small business

Yesterday Yahoo announced that Yahoo Small Business would be spun out with the company’s remaining shares of Alibaba:

I am excited to share that Yahoo Small Business is the “Active Trade Business,” mentioned in our Q4 and full year 2014 earnings announcement. What this means is that Yahoo Small Business will move over to the newly formed public company, along with Yahoo’s approximately 384 million shares of Alibaba. With this new opportunity, we can invest even more in our platform and chart our own course.

According to the Wall Street Journal, Yahoo was legally required to spin out “a part of its operating business so that, at least for tax purposes, the new entity includes an ‘active trade or business.'” The company had to pick one of its business units for this — and it chose Yahoo Small Business.

According to Yahoo, Yahoo Small Business revenues were approximately $50 million last year.

At one time, roughly a decade ago, Yahoo claimed to be the largest small business webhosting company in business. That title now goes to GoDaddy. But years of neglect, mitigated only recently, have diminished the unit’s performance and importance within Yahoo.

Yahoo small business

Yahoo Small Business now appears to be an outlier in the company’s overall strategy — hence the decision to jettison the unit. This move should be seen in the larger context of Yahoo’s apparent reluctance to develop a local search capability beyond its very basic one in general search results.

There are roughly 100 Yahoo Small Business employees and 1.5 million customers according to the WSJ who will be “invited” to join SpinCo. Despite the claim of new investment it’s not clear that the business unit won’t simply be “baggage” for the new company whose main purpose is to own the remaining 384 million Alibaba shares.

It is possible, however, that Yahoo Small Business could gain new investment and new life in SpinCo. It’s also possible that another entity could later come along and acquire the unit, assuming financial regulations wouldn’t prevent that in the future.

Yahoo Small Business current offers a broad range of SMB services, including domain hosting, e-commerce and local marketing solutions.

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2 Responses to “SpinCo: Yahoo Bails Out on Its Small Business Division”

  1. Mary Bowling says at

    A small business play aimed at the Chinese market?

  2. Greg Sterling says at

    Don’t think so. Company is really just a holding company for the stock.

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