Yahoo! Stumbles with Asain Assets

It wasn't long ago that Yahoo!

CEO Carol Bartz noted on an earnings conference call that she would have some news for investors regarding the Asian assets that the company had long held on its balance sheet. Management gave the impression that a monetization of these assets, which some Wall Street analysts modeled in an $8 - $10 share price, was imminent. The monetization that came about, however, was likely not what management expected. Even though Yahoo! was informed of a transaction that occurred in the first quarter on or about March 31, the company did not release this information on the first quarter conference call on April 19, 2011. In filing its 10-Q form with the Securities and Exchange Commission, the company noted that Alibaba Group spun off its AliPay unit to an entity controlled by Jack Ma, the CEO of Alibaba Group. In owning 40% of Alibaba Group, Yahoo! also has a position on the board of directors but states that there was no vote for this transaction. One Wall Street analyst valued the AliPay unit of Alibaba Group at approximately $8 billion. The relationship between Alibaba Group and Yahoo! management has been strained in the past, as Jack Ma made public his desire for a decrease in ownership by Yahoo! These recent events will likely harm the relationship further. This sudden change of ownership has sent investors heading for the exit door as they begin to realize that if this could happen to AliPay, where else could it happen? Confidence is also lost in Yahoo!'s management in how the company released this material information.