Yahoo’s Revenue Rise, Profits Fall

The third quarter delivered a profit of US$76 million, compared with US$6.8 billion (RM29.1 billion) a year ago, when Yahoo enjoyed a one-time gain linked to sale of shares in Chinese e-commerce company Alibaba.

Yahoo! Inc. reported sales that fell short of analysts’ estimates as a turnaround effort led by Chief Executive Officer Marissa Mayer enters its fourth year without significant growth.

The cash flow at Yahoo’s core business, which his firm values at $4 billion, “could be meaningfully improved, and making this business trade on its own merits is a critical step for the value to materialize”, he said.

The struggling Sunnyvale company revealed the search partnership, signed October. 1 but still awaiting regulatory approval, as it announced its third-quarter earnings and revenue that missed Wall Street expectations.

Revenue, after deducting fees paid to partner websites, fell to $1.0-billion from $1.09-billion.

The drama is rising in anticipation of Yahoo’s third-quarter earnings release Tuesday.

“Mobile has been the biggest win for the company so far”, said Mayer, noting that it rose 31%, year over year, to $270 million. Yahoo and Google also agreed to certain provisions with the U.S. Department of Justice, but the companies have not disclosed details. Ms. Mayer said she plans to share more specifics about this plan in the coming months.

Yahoo’s stock dipped 53 cents, or 1.6 percent, to $32.30 in extended trading after the numbers came out. Goldman: “We couldn’t see a way to make money”.

Buffering the blow was news of Yahoo’s alliance with Google.

Google will pay Yahoo a percentage of the gross revenues from AdSense for Search service ads displayed on Yahoo Properties or Affiliate Sites.

Here’s an excerpt from the filing describing Yahoo’s agreement with Google. It expires at the end of 2018. While Mayer and her team have talked about the impressive growth of this group – up 55% year over year to $255 million in the second quarter – investors have noted there is confusion about this. Mavens revenue made up about 34% of the company’s total revenue. Ms. Mayer has steered investors to this stable of assets to offset the declines from elsewhere in the company. She left in September to join an entertainment company.

Mayer brought up the rash of changes nearly as soon as Tuesday’s earnings call began.

Another interesting number: Yahoo’s traffic-acquisition costs jumped to $119 million from $3 million a year ago, largely due to its deal with Mozilla and Oracle to provide search results.