Yahoo May Sell Stake in Japan Joint Venture

Yahoo (YHOO) has operated in Japan for over a decade as part of a joint venture with Internet giant Softbank. The U.S. portal is now in talks with Softbank to sell its 35% stake in Yahoo Japan for as much as $8 billion, according to a number of media sources. Neither company would confirm the talks.

Many analysts believe that Yahoo could use the money to become more competitive with Google (GOOG) and Web 2.0 firms like Groupon and Twitter.

That analysis is probably flawed. Yahoo's plans to take search market share from Google are based on its joint venture with Microsoft, so there is little the company can do to influence its presence in the U.S. search market. Yahoo would also have trouble entering the social network business. Groupon has been valued at over $10 billion, Facebook's valuation is near $50 billion, based on a recent investment from Goldman Sachs (GS). Morgan Stanley may buy a 10% stake in Twitter for as much as $450 million. None of these companies has shown an interest in a sale or near-term IPO

Yahoo's market cap is only $21 billion, having fallen nearly 50% in the last five year. It would have to give up a large portion of its equity value to buy a big social network, even if it had $8 billion from a sale of its Japan interests. The only large social network for sale now is News Corp's (NWS) MySpace, which is losing both money and users.

Even with $8 billion in the bank, Yahoo would not have the capital or market value to become a significant presence in the hot social media industry, which is now at the center of Internet destination growth.