*Uh-oh.
http://uk.businessinsider.com/yahoo-could-write-off-entire-goodwill-value-of-tumblr-2016-2
In 2013, Yahoo spent $990 million to acquire the microblogging site
Tumblr ($1.1 billion if you include the $113 million in liabilities).Last month, Yahoo wrote off $230 million
of its value. And now, it’s hinting that there’s a chance it could
write off the entire goodwill value that it paid to acquire Tumblr.According to its annual 10-K filing Monday, Yahoo wrote (bolded for emphasis):
“Given the partial impairment
recorded in the Tumblr reporting unit in 2015, it is reasonably possible
that changes in judgments, assumptions and estimates the Company made
in assessing the fair value of goodwill could cause the Company to
consider some portion or all of the remaining goodwill of the Tumblr reporting unit to become impaired.”At the time of the acquisition, Yahoo said the goodwill portion of
the deal was roughly $750 million. Goodwill is the amount paid for the
company beyond what is valued on the balance sheet, including things
that are hard to measure, like the company’s reputation or ideas that
could bring future growth.In other words, Yahoo spent $750 million more than the actual value
of the assets owned by Tumblr to buy the company. But now it’s saying
all of the $750 million could possibly go down the drain.The company said that the impairment was a result of many things,
including smaller market share, slower revenue growth and cash flow.
Yahoo said during its most recent earnings call that Tumblr failed to
reach its 2015 revenue target of $100 million.One reason for the sales shortfall has to do with Yahoo’s
decision to combine Tumblr’s sales team with the rest of the company. As
Business Insider previously reported, the integration didn’t go too well and Yahoo is now unwinding the two sales teams.That doesn’t mean Tumblr is doomed. Its revenue is still
growing and Yahoo named it as one of the three major products for the
company moving forward. Plus, since the deal is already paid for, write
offs don’t have much impact on the company’s actual financials, meaning
it will only change the book value of the assets owned by Yahoo.But the fact that Yahoo could possibly write off the entire
goodwill portion of the deal is a striking admission of failure for the
biggest deal on CEO Marissa Mayer’s watch….
hmmmmm…. time to make a backup?