Yahoo's acquisition of blogging site Tumblr, the biggest deal under the leadership of Marissa Mayer, is now seeming like a blunder on the company's part, possibly the biggest financial gaffe by the CEO.

At the time of acquisition, Mayer had let on that Tumblr is "incredibly special" and had promised not to "screw it up."

But it seems that is exactly what Yahoo has ended up doing.

The company may have sealed the deal with Tumblr in 2013 for $1.1 billion, but at its Q4 2015 earnings call on Tuesday, Yahoo sheepishly admitted that it has reduced the value of the startup to $230 million.

Tumblr was previously valued at $900 million by Yahoo. However, the blogging startup's liabilities led to the differences in the $1.1 billion purchase price and the $900 million value in Yahoo's books.

At the earnings call, Yahoo Chief Financial Officer Ken Goldman says that the company has taken a charge worth $4.5 billion post its revaluation of some assets, including Tumblr. The valuation of Tumblr, whose acquisition by Mayer was expected to breathe a fresh lease of life into the ailing company, has been reduced by a whopping 23 percent. The move reflects the fact that Yahoo overpaid in the deal worth $1.1 billion.

"We concluded that the carrying value of our U.S. & Canada, Europe, Latin America and Tumblr reporting units exceeded their respective estimated fair values. The goodwill impairment resulted from a combination of factors, including decreases in our market capitalization, projected operating results and estimated future cash flows," says the company.

In October 2014, Mayer had estimated that Tumblr would generate $100 million in revenue in 2015. However, the startup missed the target.

"In 2015, we experienced a slower ramp in monetization than we initially expected, and coupled with the sales realignment, the business didn't deliver that $100 million revenue goal for the year," notes Mayer at the earnings call.

As we reported, Yahoo hinted that the company would be shutting down a few of its international offices, as well as reducing its staff by 15 percent. This cost cutting decision would be sending alarm bells for the company's employees and does not augur well for the future. The decision is likely propelled by the net losses the company has reported in the holiday quarter.

In Q4 2015, Yahoo's revenue was $1.27 billion, which is a 1.6 percent increase when compared to the same period in 2014. However, the California-based company recorded a net loss of $4.44 billion in the quarter.

The company has also revealed that going forward it would be considering "qualified strategic proposals," which, if one reads between the lines, suggests that Yahoo is possibly looking at sale of the business.

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