Mozilla stands to earn $1 billion from Yahoo sale, but is it worth that much?

The one company that stands to gain or lose a great deal from the sale of Yahoo is Mozilla, the makers of the Firefox browser. At stake is over $1 billion. Mozilla and Yahoo signed a contract in 2014 that would cost Yahoo approximately $375 million a year till 2019, reports Recode. This contract contains a clause that gives Mozilla the option to back out of the agreement, but still get paid, if Yahoo gets sold off and if the new buyer isn’t as committed to search as Mozilla expects. Marissa Mayer, who pushed for this contract in 2014, pre-emptively outbid Google with an offer that was much larger than expected, considering the declining fortunes of Mozilla at the time. It’s estimated that Google was paying Mozilla a little over $100 million—some estimates put that figure at $300 million—and at $375 million, Mayer’s offer was significantly larger. At the time, Mayer believed that the expense was justified. She didn’t expect that Yahoo would get sold off and her plan revolved around a great deal of expenditure to put Yahoo back on the map again. Mozilla’s Firefox browser has lost a great deal of market share to Google Chrome. At the time of the deal, it commanded only 12 percent of the market with as good as no presence in the mobile space. To make matters worse for Mozilla and Yahoo’s buyers, Firefox’s fortunes have seen a drastic decline since the beginning of this year and they’ve lost a full 30 percent of market share since January. The problem for Mozilla and Yahoo’s potential buyers is that the deal represents a significant investment. For the buyers, this means $1 billion in payout to a platform that may not have any significant value. This is exacerbated by the fact that it’s very unlikely that these buyers are even interested in developing Yahoo’s search platform. A deeper analysis by TechPinion reveals that the outlook for everyone involved isn’t that good. If buyers find a way to back out of the deal with Mozilla, which they will do their best to do, Mozilla stands to lose a massive chunk of income (97 percent of their yearly income). Worse still, Google doesn’t seem to be interested in Mozilla anymore and a potential search deal with Microsoft may not be that lucrative in the face of zero competition. Bidders are also worried as many of them weren’t aware of the deal till only recently. TechPinion adds that the value of Yahoo’s assets is also in question. There are apparently $1 billion in payouts that need to be made to Yahoo employees with stock options. The value of Yahoo’s patent portfolio and real estate in Silicon Valley is also expected to be of less value than initially expected.