Beaten-Up Yahoo! (YHOO) Slumps as Smaller Rival AOL (AOL) Plans Massive Capital Return

August 27, 2012 1:05 PM EDT
AOL, Inc. (NYSE: AOL) shares are trading higher Monday following an earlier announcement of a new $600 million accelerated buyback plan as well as an impressive special dividend. The stock is up about 2 percent in the afternoon session.

Lower on the session is Yahoo! (Nasdaq: YHOO). Just a few weeks ago, in an 8-K filed with the U.S. SEC, the former Internet search giant said it might alter plans on returning capital to shareholders. The disclosure came soon after Marissa Mayer was appointed CEO in July.

Initially, Yahoo! was expected to dole out some of the generous return realized on its Alibaba investment.

The new move by Yahoo! comes as new CEO Marissa Mayer is taking a look at the Company's books and cash allocation strategy.

AOL's move might add a little more pressure to Yahoo! and shows just what kind of mess Mayer might have on her hands. For Yahoo!'s part, AOL did get a chance to restructure in 2009, trimming off all the fat and coming out fighting.

But, Yahoo! shareholders shouldn't turn their back on the company quite yet. Like Mayer, AOL CEO Tim Armstrong also worked at Google (Nasdaq: GOOG), though in its ad business rather than product.development and integration. Still, the talent pool at Google runs deep and AOL's solid performance over the last few years speaks volumes for Armstrong and what might be in store at Yahoo!

For reference, AOL captured just 1.5 percent of the U.S. Internet search market in July, compared to Yahoo!'s 13 percent.

Yahoo! is trading 0.5 percent lower on the session.

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