Yahoo’s breakup puts CEO Marissa Mayer on the hot seat

Yahoo! confirmed Wednesday it is throwing in the towel on a plan to spin off its valuable stake in Chinese e-commerce giant Alibaba and will instead pursue a reverse spinoff of its core Internet business — putting CEO Marissa Mayer under even more scrutiny.

The move is aimed at unlocking value for the company’s bread-and-butter business, which includes highly trafficked destinations such as Yahoo Finance and Yahoo News.

As it stands, Wall Street assigns almost no value to the core of Yahoo, with a total market capitalization of $35 billion, after backing out the Alibaba piece.

Mayer wanted to spin off the Alibaba stake, valued at $30 billion, and use some of that money to build up the Internet business. But that plan was scuttled after the IRS refused to provide the company guidance on whether the spinoff would be tax-free, spooking investors.

The company is also under fire from activist investor Starboard Value, which urged the company to ditch the Alibaba spinoff and pursue a sale of the core business.

Chairman Maynard Webb tried to tamp down sale speculation on a call Wednesday morning with investors.

“There is no determination to sell the core. We are focused on unlocking that value,” he said. “We believe the best plan is to separate the Alibaba stake and turn around the operating business.”

Still, telecom operators such as Verizon and AT&T will no doubt want to kick the tires as they bulk up on streaming video offerings and ad tech that can help monetize consumer behavior across the Web. Verizon bought another Internet pioneer, AOL, earlier this year.

“It’s just like with AOL, I mean we look at everything across the spectrum,” Verizon’s chief financial officer, Fran Shammo, said just this week at an investor conference. “I mean we’ll look at it but it’s way too premature to talk about that one.”

Yahoo’s chief financial officer, Ken Goldman, told investors on the Wednesday call that the spinoff would be a complex transaction — taking upwards of a year — because a variety of third parties would have to sign off on it and the company would have to gain approval from both regulators and shareholders.

Mayer, a former top executive at Google, also took time during the call to tout her progress in turning around the company since joining as CEO in July 2012.

“I am leading a very different company than I did in 2012, with more mobile users and more modern ad technology to serve our clients,” she said, citing a 50 percent year-over-year increase in revenue generated by the company’s mobile, video, native advertising and social media products.

Yahoo! also revealed Wednesday that Mayer’s pal, Max Levchin, the co-founder of Paypal, is exiting the board to focus on his new consumer finance venture, Affirm.

Shares of Yahoo were up less than 1 percent at $34.65 in trading Wednesday morning.