How Much Is Tumblr Really Worth To Yahoo?

Yahoo! Inc.

said it may have to write down the entire money spent on buying microblogging site Tumblr which it acquired for $990 million in 2013. In February, Yahoo said it took a $230 million impairment charge related to Tumblr and was considering strategic alternatives for its core internet business. The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired and, as a result, the company recorded goodwill in connection with this deal. In a regulatory filing, Yahoo said: "Given the partial impairment recorded in our Tumblr reporting unit in 2015, it is reasonably possible that changes in judgments, assumptions and estimates we made in assessing the fair value of goodwill could cause us to consider some portion or all of the remaining goodwill of the Tumblr reporting unit to become impaired, which comprised $519 million of our remaining $808 million goodwill balance as of December 31, 2015." In addition, a future decline in market conditions and/or changes in its market share could negatively impact the estimated future cash flows and discount rates used in the income approach to determine the fair value of the reporting unit and could result in an impairment charge in the foreseeable future, Yahoo said. At the time of the acquisition, the purchase price exceeded the estimated fair value of the tangible and identifiable intangible assets and liabilities acquired and, as a result of the allocation, the company recorded goodwill of $749 million in connection with this transaction, Yahoo said in a regulatory filing. The Tumblr deal was seen as Yahoo CEO Marissa Mayer's attempt to boost traffic growth. During the recent earnings call, the company reported that Tumblr had failed to achieve its revenue target of $100 million that was set for 2015.