Yahoo shares jump as report says it may sell internet business

The Yahoo Inc. board of directors is considering a plan to sell off the company's troubled internet business, according to a report in the Wall Street Journal.

The Yahoo board has a series of meetings from Wednesday to Friday in which it is discussing options over how to move forward on its lucrative stake in Chinese e-commerce firm Alibaba Group.

Shares of Yahoo rose sharply Wednesday on the news. It was up5.7per cent to $35.65 US in late afternoon trading on the Nasdaq stock exchange.

Activist investor Starboard Value LP suggested last month that Yahoo hold onto the Alibaba stake and find a buyer for Yahoo's flagging internet business.

Yahoo had hoped to spin off its Alibaba stake tax-free in a separate unit, but the Internal Revenue Service has not given approval for such a plan. Starboard advised against the spinoff in a letter to the board, saying that "the potential penalty for being wrong is just too great."

The tax bill on its 15 per cent holding in Alibaba could be as much as $10 billion US.

• Yahoo fails to get IRS blessing for tax-free Alibabaspinoff
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Yahoo chief executive Marissa Mayer has been under pressure to restore its internet business for the past three years, without much success. Earlier this year, there were rumours she might be ousted, and this week, Yahoo is mulling plans to shut down more money-losing divisions.

In the latest quarter, revenue in mobile, native video and social ads grew 43 per cent, while overall revenue declined by five per cent, disappointing investors. Yahoo's operating income fell 41 per cent to $92 million in the quarter, and restructuring costs continue to rise.

Yahoo runs several web properties including Flickr, Yahoo Finance, blogging platform Tumblr and fashion site Polyvore, as well as the messenger, mail and search functions it is known for. Yahoo was once one of the biggest internet sites, but fell out of favour after failing to keep up with consumer trends.

What that business might be worth is unknown. Potential bidders for parts of the companyinclude telecom and media companies, includingVerizon, AT&T Inc., Comcast Corp., Walt Disney Co., and News Corp.

Much of the value of Yahoo's shares now is linked to its stake in Alibaba, which has enormous growth potential. Starboard has also suggested it retain Yahoo Japan, a successful joint venture with Japan's Softbank.