It was revealed on Monday that Yahoo (NASDAQ: YHOO) has reached a deal with China's Alibaba to sell back its 40% stake back to the Hangzhou-based internet company for $7.1 billion.

Yahoo will be delighted to see some hard cash in its accounts after suffering through a particularly difficult few months and has lost 65% of its value since its 2006 peak.

While other web-based companies like Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN) and Facebook (NASDAQ: FB) have largely succeeded by expanding their businesses into new areas and innovating, Yahoo has struggled doe to an apparent inability to do the same thing. The company has remained static, and many people don't know what they do anymore, besides own a search engine and email platform that is inferior to Google in just about every way.

Whichever way you look at it though, the Alibaba deal was a good bit of business for YHOO, who paid $1 billion for the 40% stake back in 2005. The two companies may not have always agreed about everything, occasionally airing their dirty laundry in public, but a $6.1 billion return on that investment has got to be something to smile about.

The two companies fundamentally disagreed about Airplay, which used to be Alibaba's online payments business until Ma spun it out two years ago, a move that angered Yahoo. That scuffle went on for months before a settlement was reached in July. Now, with this new deal, the fights should be ended, at least for now.

YHOO interim CEO Ross Levinsohn said of the agreement that, "Today's agreement provides clarity for our shareholders on a substantial component of Yahoo!'s value and reaffirms the significance of our relationship with Alibaba."

Meanwhile, Alibaba CEO Jack Ma poured fuel on the rumors that his company might be interested in buying Yahoo in the future. "This transaction opens a new chapter in our relationship with Yahoo."

The deal will see Yahoo get $6.3 billion in cash and up to $800 million in newly issues Alibaba preferred stock. That is still a great return for Yahoo, whose shareholders will surely be a lot happier at the start of this week.

"We look forward to delivering the proceeds of the near-term transaction to our shareholders, and to the further enhancement of value and the additional monetization in the future that this agreement enables," said Yahoo CFO Timothy R. Morse.

Follow me @BCallwood.

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  5. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  6. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  7. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  8. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  9. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  10. Stock Analysis

    The 6 Biggest Russian Energy Companies

    Learn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!