The moves represent a stark rejection of Chief Executive Officer Marissa Mayer's plan to sell the $30 billion (roughly Rs. 2,00,450 crores) Alibaba stake and to revive Yahoo's core Internet unit focusing on growing mobile, video and social media ads.
Yahoo could not immediately be reached for comment. Its shares rose more than 2 percent in after-hours trading. Alibaba's shares rose 1.3 percent.
Yahoo's core business consists of selling search and display ads on its popular news and sports sites, email service and products like Tumblr.
Yahoo is also considering what to do with its stake in Yahoo Japan, according to the CNBC report. Yahoo owns 35 percent of that company, worth about $8.5 billion (roughly Rs. 56,794 crores) at current exchange rates.
The CNBC report on Tuesday, which cited unnamed sources, did not disclose a possible sale price for the core Internet unit. Analysts and bankers have estimated it could fetch between $2 billion (roughly Rs. 13,363 crores) and $8 billion (roughly Rs. 53,453 crores), with many seeing $4 billion (roughly Rs. 26,726 crores) as the likely price, but some regard its value as less than zero.
The CNBC report indicated the sale process could take a year or more. But one analyst, Robert Peck with SunTrust, said he expected the company to expedite the process. Three to six months is reasonable, he said, "depending on who acquires it."
After such a sale, all that would be left, essentially, would be the Alibaba and Yahoo Japan stakes.
"This is absolutely a step in the right direction," said Neil Doshi, an analyst at Mizuho Securities USA. "We'd much rather see Yahoo either spin off or potentially sell the core and have a tax liability on a smaller piece than have it on the larger Alibaba piece."
Private equity, media and Internet firms are potential buyers. On Monday, the chief financial officer of Verizon Communications Inc said the No. 1 US wireless carrier could look at buying Yahoo's core business, but made no mention of a price.
An end to tech role
The latest report followed a three-day meeting of Yahoo's board of directors last week, which concluded on Friday. Yahoo has faced pressure from activist investor Starboard Value LP to sell the core business rather than proceed with the planned spin-off of its stake in Alibaba, which could trigger large tax payments.
In January, announcing the Alibaba plan, Mayer said the deal would be tax-free, but the US IRS has declined to verify that. Taxes related to the spin-off could leave Yahoo shareholders on the hook for $12 billion (roughly Rs. 80,180 crores).
"This was really a really good PR move by Starboard as the spinoff was highly unlikely anyway given the tax implications and they knew they could claim victory once Yahoo made the official announcement," said Jim Osman of The Edge Consulting Group, a research firm that advises activist hedge funds.
The sale of the company's core Internet business would effectively end Yahoo's role as a key US tech company and be a recognition that Mayer's efforts to revive the businesses have yielded few results.
But Doshi, of Mizuho Securities, said that was not necessarily a defeat for Mayer.
"This is a potential win-win for Marissa," Doshi said. "She can sell the company and have a graceful exit or she can be part of a larger company or private equity team and still continue to run the business."
© Thomson Reuters 2015