UPDATED 19:55 EDT / APRIL 26 2011

Yahoo Contemplates Hadoop Spinoff

An item in today’s Wall Street Journal (wsj.com) indicates that Yahoo (ticker symbol YHOO) may be contemplating spinning off its’ Hadoop software engineering unit into a new separate firm that would continue to develop and supply the free software while charging companies for their expertise in using it. Analysts estimate that as a stand alone entity Hadoop could become a billion dollar business.

Yahoo would collaborate with and take a significant stake in the new firm, which would compete with a bevy of start-ups such as Cloudera Inc. and established players such as International Business Machines Corp. that distribute versions of Hadoop and offer related services to other companies, people familiar with the matter have stated. A Yahoo spokeswoman declined to comment. But Benchmark Capital, a Silicon Valley venture-capital firm, says it has talked to Yahoo about how it might form a Hadoop company. Hadoop is “the biggest movement in enterprise-software in years” said Rob Bearden, a partner at Benchmark Capital. James Kobielus, a senior analyst at Forrester Research, said in five years the market for Hadoop-based products could reach billions of dollars.

Hadoop has become an increasingly popular tool for Internet companies including Yahoo, eBay Inc., Facebook Inc., and Twitter Inc. EHarmony.com, the match-making site, has said it uses Hadoop to help make matches among its members. But the software is being adopted by other industries. Financial companies such as Visa Inc. have said they use Hadoop to detect fraud, and financial-trading firms use it to detect stock-market patterns or predict mortgage-default rates, according to Amr Awadallah, a former Yahoo engineer and co-founder of Cloudera, which helps more than 90 companies to use Hadoop. Doug Cutting, the creator of Hadoop who named the software after his child’s toy elephant, now works at Cloudera.

The stock price of Yahoo has so far shown no reaction to the news, closing today at $17.28, up 17 cents. The stock has been trading in a sideways trading pattern for several months and has been unable to break above its’ 200 day moving average since November, 2007.


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