Don't Bet on Alibaba Buying Yahoo's Internet Business, WSJ Reports

The board of Yahoo Inc is weighing a sale of its core Internet business when it meets this week, a source familiar with the matter told Reuters. In a research report in October, Cantor Fitzgerald analyst Youssef Squali valued Yahoo's core business at $3.9 billion, not including cash.

Despite Yahoo CEO Marissa Mayer's attempts to update Yahoo's Internet business for the mobile age, the company has continued to fall far behind Google and in the competition for advertising dollars. The article states Yahoo's board is planning a series of meetings throughout the rest of this week to consider selling off the company's stagnant Internet business.

Yahoo's shareholders could end up paying roughly $12 billion in taxes if the Internal Revenue Service deems the Alibaba transaction to be taxable after the spinoff. Recently, Starboard Value LP, an activist hedge fund investor, urged the company to sell instead all the remaining assets, particularly its core business, which has been flagging for some time now. Many believe that any company who acquires the core business of the company would get a variety of online businesses.

Yahoo had previously planned to spin off its shares in Alibaba Holding Group, through a company called Aabaco Holdings, but has held back on the move because of uncertainties about potential tax implications.

Private equity firm TPG Capital is also interested in buying some of the internet portal's media properties. Search revenue, on the other hand, declined around 13 percent.

Yahoo's 15 percent stake in Alibaba is now worth about $32 billion, and its 35 percent stake in Yahoo Japan is worth about $8.5 billion, according to the Wall Street Journal. In fact, Re/Code is reporting that this week's meetings are nothing more than annual board meetings that Yahoo always holds in December. Once being the most powerful sites on the Web, Yahoo has been beaten in search and email by Google and overtaken in media by Netflix and Amazon. The company's stake in Chinese e-commerce giant Alibaba, worth $30 billion, makes up the vast majority of Yahoo's overall market cap of $33.6 billion.

Reports of the possible sale was received favorably, with stock rising 7 percent in extended trading.