Inside the world of business
Yahoo's rise and fall is a warning signal to all
YAHOO CHIEF executive Scott Thompson bowed to the inevitable at the weekend and stepped down. It still remains unclear how the internet company managed mistakenly to inform the stock market that Thompson had a computer science degree.
It’s just the latest instalment in the dot com soap opera that Yahoo has rapidly descended into since its board clumsily rejected Microsoft’s $44.6 billion offer for the company in early 2008. Shareholders must rue the day that deal went south. Even with the inevitable bounce in the share price after Thompson’s departure, Yahoo’s market cap was still shy of $19 billion yesterday.
As well as press-ganging Thompson to leave, the Yahoo board also waved the white flag at activist shareholder Daniel Loeb from hedge fund Third Point, Yahoo’s single biggest outside shareholder.
Loeb and two of his associates are getting board seats at Yahoo. While many in Silicon Valley have sniffed at a hedge fund gaining influence at one of the original dot com powerhouses, Loeb clearly believes the company is undervalued. Company watchers expect some move on Yahoo’s 42 per cent stake in the Chinese e-commerce firm Alibaba sooner rather than later.
Contrast Yahoo’s travails with the latest darling of Silicon Valley: Facebook. It’s easy to forget that with one of the first comprehensive directories of the early web, Yahoo was seen as having a similar pivotal role to the one Facebook now enjoys.
Despite its troubles Yahoo still manages to pull in revenues of about $1 billion a quarter and attracts 700 million visitors a month to its portal; broadly similar to Facebook. But Facebook is likely to attract a valuation of about $100 billion when it makes a stock market debut later this month.
Anyone planning to buy and hold Facebook stock would be advised to look at Yahoo’s rise and fall as a salutary tale.
Jury still out on Providence's $500m Irish offshore bet
Exploration group Providence’s drilling programme around the Irish coast is well under way at this stage. It has already shown signs of paying off. The company’s Barryroe prospect in the Celtic Sea produced oil at a rate of 3,500 barrels a day. Work there also revealed that the licence area holds considerable quantities of natural gas.
Last year, Providence sold its interests in Mexico and Nigeria, allowing it to cut net debt by more than $30 million. In April, it raised $100 million through the issue of new shares. It has also paid off a large tranche of its convertible bonds, leaving it with about €11 million due to be paid off on the remaining instruments at the end of July.
Providence also raised $65 million last year. Some of the proceeds of both fundraising activities are going towards its drilling programme, which kicked off in Barryroe in the Celtic Sea last November.
This is now complete, and the group is preparing to move on the Kish Bank, where it will begin exploratory drilling in the Dalkey Island licence area late this year. St George’s Channel is also pencilled in for this year while the Porcupine basin and Rathlin Island will follow in 2013.
The company is always keen to point out that this represents an investment of $500 million by Providence and its partners in Ireland. Which is true, but it also represents a $500 million bet that Ireland’s offshore frontiers are going to produce viable quantities of oil and gas.
There are those who would argue that this is a long shot. Last week’s report from the Oireachtas agriculture and natural resources committee pointed out that 182 wells have been drilled off the Irish coast.
Of these, 129 have been exploration wells, and five have turned out to be viable. However, that is balanced by the fact that many of Providence’s licences have already been shown to hold quantities of oil and/or gas. Also, prices and technological advances mean that wells once not considered to be viable can now been seen as commercial prospects.
While Barryroe has been the focus of much attention recently, Providence chief executive Tony O’Reilly’s statement yesterday pointed out that 2011 was about a lot more than Barryroe for the group. Presumably, he’s hoping that its drilling programme also produces more than just Barryroe.
Oireachtas has valid McKillen role
It appears that Mike Aynsley’s relationship with Paddy McKillen may be subjected to scrutiny by the Oireachtas finance committee.
Michael McGrath, the Fianna Fáil finance spokesman, has written to Alex White, the chairman of the finance committee, asking it to look at information that has come to light in McKillen’s court battle with the Barclay brothers over control of the Maybourne Hotel group in London. What has been revealed about his relationship with IBRC – the former Anglo Irish Bank – is of particular interest.
It is tempting to dismiss this as just an opportunist move by McGrath, given that no politician ever did his career any harm by bashing a banker or two in public.
And no doubt the committee will have some sport with the IBRC chief executive over his friendly text messages to McKillen, but it should not lose sight of the important role that it can play if it so chooses.
IBRC is 100 per cent owned by the State and, as a result, is subject to little or no public scrutiny. Indeed, were it not for McKillen’s decision to take his case we would be none the wiser about his apparently close relationship with Aynsley.
The issue that has now emerged is whether IBRC is serving the taxpayer’s best interest by sticking so closely to some of Anglo’s biggest clients such as McKillen and, indeed, Denis O’Brien.
In the case of McKillen, the bank does need to explain why its support of McKillen extends to turning down an offer from the Barclay brothers to buy some €300 million of McKillen’s debt.
Arguably the only place where the bank’s management can be held to account about this is an Oireachtas committee.
QUOTE OF THE DAY
It is undisputed that the Greek people have to suffer from the consequences of decades of neglect. There is no easy path.
– Wolfgang Schäuble, the German finance minister, heading into a meeting of EU finance ministers yesterday
TODAY
German chancellor Angela Merkel meets French president-elect François Hollande for the first time since the French presidential election.
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