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Marissa Mayer's war chest to grow

March 17, 2014: 1:23 PM ET
Marissa Mayer

Marissa Mayer could soon have more money to spend for Yahoo acquisitions once Alibaba goes public.

Yahoo CEO Marissa Mayer may have a spring in her step this morning. Yahoo's stock is higher following the news that Alibaba, the Chinese leader in e-commerce, was preparing to file for an initial public offering in the United States.

Yahoo owns a 24% stake in Alibaba. The stock has been volatile for the past few days due to speculation about a possible IPO filing from Alibaba.

Alibaba has been compared to the "Amazon", "eBay" and "PayPal" of China. Analysts estimate Alibaba could be worth about $130 billion, and the company could raise more than $16 billion in the IPO.  That could make Yahoo's investment potentially worth more than $30 billion.

Related: Alibaba snub puts Hong Kong exchange on the defensive 

So Mayer must be feeling pretty good.  Even her critics, who say that the only reason Yahoo's (YHOO) shares have performed so well since she became CEO is because it owns a large chunk of Alibaba, may back off now that Yahoo may be closer to cashing in on its investment.

However, some analysts still aren't convinced that the Alibaba news is that good for Yahoo. Colin Gillis, an analyst at BGC Partners, said that Yahoo may sell a little less than half its Alibaba stake after the IPO.  He thinks that money could be used for acquisitions.  But some shareholders though are hoping the cash could be set aside for a stock buyback or special one-time dividend payment.

It's also not clear just how well Alibaba will do once it starts trading. While it has been likened to a rocket, its revenue growth has slowed sequentially from 61% in the second quarter of 2013 to 51% in the third quarter.

And regardless of how much Alibaba is worth and how much cash it brings to Yahoo, Mayer still has to prove to investors that she can turn around the company's core business.  In the fourth quarter, Yahoo's revenues were down 6% as it continues to struggle in the online advertising world.

So Mayer has to show Wall Street that she can use some of the Alibaba windfall to make the company more competitive against the likes of Google (GOOG) and Facebook (FB).

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