Report: Yahoo Seeks Buyer for Hosting Unit

Does web hosting knit together neatly with news, search and advertising sales in a business plan for an Internet portal? That's a question that has come up frequently in recent years as Yahoo has gone through several phases of redefinition, prompting speculation that the company would eventually divest its large web hosting operation.

It looks like "eventually" has arrived. Reuters reports that Yahoo is seeking to sell its Yahoo Small Business hosting service, and is seeking a sale price of $350 million to $500 million. The move is part of a broader strategic refocusing that also includes a major marketing campaign that is expected to be unveiled today by CEO Carol Bartz. The company is said to be selling off assets that don't reflect its new consumer focus.

Yahoo Small Business operates one of the largest U.S. shared hosting hosts, with about 2.2 million sites, according to recent data. That includes its online store, one of the leading turnkey e-commerce offerings for small businesses. That base of e-commerce customers is a valuable asset at a time when profit margins are being squeezed and pundits see cloud computing emerging as a competitive threat.

Reuters said Yahoo has received interest from corporate buyers and private equity firms, including General Atlantic, which owns one of Yahoo's leading competitors in the small business hosting market, Network Solutions. The Reuters report quotes a source as saying that "Yahoo's price expectations are higher than what buyers were willing to pay."

The shared hosting market is traditonally fertile ground for mergers and acquisitions activity. At the recent HostingCon conference, there were reports that valuations for shared hosting assets had stabilized after several years of trending lower.  

So what can we conclude from the Reuters report? The focus on valuation suggests that this could be insiders or investment bankers jawboning in hopes of prompting some movement on terms. But the changes in the wind at Yahoo, along with Bartz no-nonsense reputation, suggest that Yahoo might be a motivated seller.