Tumblr is proving not to be the cash cow Yahoo thought it was going to be , hinting it may write off the entire goodwill value it paid to purchase it.
In 2013, Yahoo dished out $990 million to buy the microblogging site although in reality the buying price was $1.1 billion as Tumblr had $113 million in liabilities.
In January Yahoo wrote off $230 million of Tumblr's value and this month (March) in its annual 10-K filing wrote "Given the partial impairment recorded in the Tumblr reporting unit in 2015, it is reasonably possible that changes in judgments, assumptions and estimates the Company made in assessing the fair value of goodwill could cause the Company to consider some portion or all of the remaining goodwill of the Tumblr reporting unit to become impaired."
Tumblr failed to reach its 2015 earning target of $100 million.
When Yahoo bought Tumblr it reported the goodwill portion of the deal was $750 million. Goodwill is the amount paid for a company beyond what is valued on the balance sheet e.g the company's reputation and future growth potential.
Although Tumblr may stay around as its revenues are still growing , the fact that Yahoo is moving towards writing off the entire goodwill portion of its purchase price, is somewhat of an admission of failure for the biggest deal CEO Marissa Mayer's made.