After taxes, it will keep $4 billion in cash.
For a company that’s struggling to compete, this is a godsend. It has a giant pile of cash to go make a big acquisition, or pour into developing a coherent content strategy to truly establish itself as the number one digital media company.
Unfortunately, it won’t do any of that.
Instead it’s going to buy shares, which in theory should increase demand for Yahoo stock.
How is that plan working for the stock so far? Not well.
Photo: Google Finance
The news of the Alibaba deal, and plan for buyback, broke Friday morning, pre-trading. Since Thursday’s close the stock is up a whopping 5%.You know what moves stocks 5%? Good earnings. Smart acquisitions, good deals. A generally sound, and well functioning company.
Spending $4 billion to move a stock 4% is one of the stupidest things we can imagine.
Yahoo is just shooting itself in the foot.
For more on the Yahoo–Alibaba deal, watch our quick video explainer below: