One upon a time, Yahoo! was the poster child for highflying Internet stocks. At its peak, in 2000, the company's market cap was more than $100 billion. Yesterday, it was sold to Verizon for $4.8 billion. What happened?
Yahoo was never really able to adapt its technology and culture to an Internet that became focused on social media and mobile devices, falling behind rivals such as Google and Facebook. But what ultimately forced the hand of Yahoo CEO Marissa Mayer was an investment that worked too well. In 2005, Yahoo invested $1 billion in China's hottest technology startup, Alibaba. By last year, Yahoo’s Alibaba shares accounted for the majority of the company’s value.
The problem was that if Yahoo sold off its stake, it would trigger a massive tax bill. So instead, Mayer was forced to sell the rest of the company. Yahoo will be folded in with AOL, another struggling internet brand that was acquired by Verizon last year.