Will Yahoo! disappoint again?

If someone were to award a prize for the most consistently disappointing tech stock of the past decade, Yahoo! (Nasdaq: YHOO) would surely be a heavy favourite to win. The company's missteps since the heady days of the early Internet have been numerous and legendary. There's the seemingly permanent defeat in search-engine market share against Google (Nasdaq: GOOG), for example, and the rejection of a big-bucks acquisition bid by Microsoft (Nasdaq: MSFT). And now, the company seems to be indicating that it won't be sharing the proceeds of a US$7 billion-plus selloff with its stockholders.

Saving for a rainy day
This past May, Yahoo! finally divested half of its stake in China's top B2B enterprise, Alibaba. This was a sale shareholders had been waiting for a long time to see, and it was rightfully greeted with a huge collective sigh of relief. Back when Yahoo! was in a healthier position in the online world, it amassed stakes in both Alibaba and Yahoo! Japan, a similarly titled but separately listed company.

Both positions were big. Up until the Alibaba deal, Yahoo! held 40% of that company and an almost 35% stake in Yahoo! Japan. As time wore on and the company's competitive position eroded, those holdings rose in relative value. Since becoming a shareholder in both, Yahoo!'s basically folded from the search-engine game (these days its search isn't even proprietary — it's Microsoft's Bing in a thin disguise). Today, Google commands this market with a powerful share of nearly 67%. Microsoft is a distant second at 15.6%, and Yahoo! is No. 3 with 13.4%.

In addition, Yahoo!'s years-old initiative to bring in more money from content hasn't stopped recent top- and bottom-line erosion. Full-year 2011 revenue was a shade less than US$5 billion, nowhere near the US$6.3 billion of the year before. While the top-line decline was largely due to a change in accounting from the Microsoft search deal, net income was also down at a little more than US$1 billion, in contrast to 2010's US$1.2 billion.

So what in the company's stable of assets is left for shareholders to get excited about? That's right — those big stakes in Alibaba and Yahoo! Japan.

Back in the pocket
It's no wonder Yahoo! investors blew a big raspberry when the company admitted that it might not pass along the boatloads of cash from the Alibaba sale. They felt they had been promised this not long after the deal was concluded, when the company said it would pay out "substantially all" of the proceeds (after taxes, of course) to shareholders.

But now it seems recently appointed CEO Marissa Mayer might be having second thoughts. According to a company filing with the SEC, the company is (understandably) going through a review of its business strategy, and "this review process may lead to a re-evaluation of, or changes to … our previously announced plans for returning to shareholders substantially all of the after-tax cash proceeds of the initial share repurchase by Alibaba Group."

In other words, shareholders, don't buy that deluxe holiday or put a down payment on the Porsche quite yet. Such precise language specifically addressing the Alibaba proceeds makes it rather likely those funds aren't going anywhere anytime soon.

Spending vs. saving
The lack of a dividend, special or otherwise, isn't necessarily a dealbreaker for tech companies. For the most part, it's expected that if they're profitable at all, the gains will be reinvested into the business to make a more powerful search engine, better software, or a sexier smartphone.

Shareholder paybacks usually happen because a company's been so successful that it almost has to return something to its owners. Such is the case with Apple (Nasdaq: AAPL), which only recently started its dividend dance, and on a relatively modest basis. Its US$10.60 payout represents a yield of 1.7% — good in tech terms but under the recent S&P average of about 2%.

Shareholders of long-established cash cow Microsoft, although the company is sputtering, fare better. The company's dividend payout currently stands at US$0.80 a year, or 2.6% in yield terms. But that seems to make little difference — the stock price has gone basically nowhere in the past decade, and the company's many forays into other business areas (MP3 players, tablets, and so on) have flopped. Few are getting excited about the prospect of owning Microsoft shares.

So if enacted, Yahoo!'s banking of the Alibaba money doesn't have to be a disaster for its shareholders. It depends, of course, on how that money is invested. So far, fresh CEO Mayer has given only the barest of hints as to what she'd like it spent on. Hopefully, she'll provide better guidance and those investments will be sensible and put into potentially lucrative areas. Otherwise, more of the company's increasingly impatient shareholders will give up and walk away from it.

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