FOCUS: Anti-Volozh move targets Yandex pushing it to revise plans

By Yekaterina Yezhova

MOSCOW, Jun 14 (PRIME) -- Recent E.U.’s blacklisting of Yandex co-founder Arkady Volozh and his instant resignation is more likely meant to hurt the Internet company that may have to revise its global strategy in favor of friendlier markets, analysts said.

“The sanctions do not target Arkady Volozh who has been always mainly outside politics. Only three countries in the world – the U.S., Russia, and China – have their own popular search systems. We can say that a functioning and popular search system is the backbone of the information and cultural sovereignty. The E.U. does not have its own search engine,” investment company Finam analyst Leonid Delitsyn told PRIME.

“The likelier goal is Russia having its own search engine but a poor one, unable to rival Google, which means the firm should be demoralized and stripped off access to the markets and money.”

On June 3, the E.U. issued the sixth package of anti-Russia measures that include personal sanctions against Volozh, “a leading businessperson involved in economic sectors providing a substantial source of revenue to the government of Russia.”

Yandex N.V., the Dutch parent of the Russian Internet company, said in a statement that Volozh stepped down from his positions as executive director and chief executive officer of Yandex N.V. and from his board and executive positions with its international subsidiaries immediately.

On June 6, Yandex N.V. board of directors said in a statement that it “will provide whatever support we can to the company and Arkady as he seeks to appeal and overturn his unfounded designation.”

“According to indirect signs, Yandex was ready for declaration of serious restrictive measures from the E.U. It immediately said that Arkady Volozh quit the board of directors and its top executive positions in Yandex’ international subsidiaries. It gives us hope that sanctions will not hit the IT holding’s business heavily. At least, Volozh’s resignation from the leading functions allows us to assume that Yandex will not be hurt much at the current stage,” investment company Algo Capital senior risk manager Vitaly Manzhos told PRIME.

He added that it is quite probable that the U.S. could slap sanctions on Yandex as it competes with Google, which Russia has recently fined 7.7 billion rubles, and there are more court claims.

“In the most general sense, tougher external sanctions push Russian companies to curb down their international business expansion. The Western world will not be affected if the Russian IT company is stuck in the Russian Internet segment. Foreign consumers will have more customary English-speaking services and ecosystems,” Manzhos said.

“In the new reality, Yandex will not be left with many an option but to focus on the market of Russia, the CIS, and some other Russian-speaking states. In theory, there is a chance of expansion on the markets of Asia, Africa, India, and Latin America. But it is not the best time to push activities there.”

Delitsyn at Finam said that Yandex would not be able to launch new robotechnics, transport, and artificial intelligence technologies on the unfriendly markets. “It is important because our internal market is not as large as that of China. The countries that impose restrictions on Yandex will lose the alternative. But it is in line with the idea of the global division of labor on the information technologies market where information services are designed in the U.S., and other countries have to act as buyers,” the Finam analyst said.

“Yandex will probably revise its strategy and slow down expansion on the large but low-margin markets, like aggregation of taxi and marketplaces. More likely, the company will cut costs there and try to make these businesses sustainable and self-sufficient. We may expect its entrance on the fintech market, with new partners, in particular now that Tinkoff Bank has new shareholders.”

The Internet company made an unsuccessful attempt to acquire Tinkoff Bank, then owned by Oleg Tinkov, in 2020.

Yandex’s shares lost 6% on June 3 alone because “investors feared that sanctions against Volozh and his resignation were a precursor of further steps,” as Delistyn said, and dived 69% since the beginning of the year to 1,400.80 rubles on June 10 on the Moscow Exchange.

The shares will trade in a corridor of 1,200–1,800 rubles during the next 12 months, the Finam analyst said.

Manzhos said that the stock has plunged technically since November 2021. “Most likely, it will soon find support near the current level. We should remember that Yandex is part of the high-tech sector, which means the quotes tend to experience deeper falls and quicker and stronger rises of the price,” he told PRIME.

“On the whole, I expect Yandex to show more or less large-scale recovery over a year. The first mid-term technical goal is to return to the 3,000–3,500 ruble range, and a more remote one is to climb back to the well-traded technical notch of 5,000 rubles.”

(57.7780 rubles – U.S. $1)

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