Yahoo Q3 2015 Conference Call: Spin-Off And/Or Gray Market And When-Issued …

21 Oct 2015 | Author: | No comments yet »

Yahoo signs ad pact with Google; earnings and revenue miss.

San Francisco – Yahoo Chief Executive Officer Marissa Mayer, well into her fourth year at the helm, is still stumbling in her efforts to turn around the ailing Web portal. The company on Tuesday reported its biggest quarterly sales drop since 2009 and gave a fourth-quarter revenue forecast that missed analysts’ estimates.

The deal with Google, a unit of Alphabet Inc (GOOGL.O), builds on an existing search partnership Microsoft Corp (MSFT.O) under which Yahoo gets a percentage of revenue from ads displayed on its sites. Yahoo also said the planned spinoff of its stake in Chinese e-commerce company Alibaba Group may not be completed until January, later than a prior target of year’s end.

Yahoo, whose shares were down 1.6 percent in after-hours trading, said the companies have agreed to delay implementation of the deal in the United States to allow the antitrust division of the Department of Justice to review it. Yahoo released its quarterly results and at the same time unveiled a partnership with Google, which will take over some of the search and advertising operations for users on Yahoo websites and apps. “We are continuing to experience revenue headwinds in the core of our business,” Mayer said during an earnings call. “We see a unique opportunity for Yahoo to narrow our strategy.” Mayer did not offer details, but said the new focus would be outlined by the end of the following quarter. “As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability,” Mayer said in a statement.

Mayer has been chasing sales growth by adding services for smartphones and tablets, new tools for advertisers and premium content to attract audiences and marketers. As investors await the spinoff of the Alibaba holdings – valued at about $27 billion – Yahoo said it will update shareholders with a new strategic plan for the company without the stake during its next earnings call. “For investors looking for signs that Yahoo has turned the tide in driving revenue growth, this quarter’s results are unlikely to be reassuring,” Paul Sweeney, an analyst with Bloomberg Intelligence, said in an email.

Google’s offerings on desktops and smartphones will complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo’s own search technologies and ad products, the company said. Many analysts attribute little value to Yahoo’s core business without its Asian assets, which also include a 35 percent stake in Yahoo Japan Corp (4689.T). On Tuesday, Yahoo projected fourth-quarter sales, excluding revenue shared with partner websites, of $920 million to $960 million, short of analysts’ average prediction of $1.08 billion. Apart from the Google deal, the only other good news came results came from Yahoo’s emerging businesses, which Mayer calls Mavens – mobile, video, native and social advertising. Revenue after deducting fees paid to partner websites fell to $1.0 billion from $1.09 billion, and the company forecast a drop to $920 million-$960 million in the current quarter.

Mayer also has lost several executives, including Jacqueline Reses, Yahoo’s chief development officer, who had shifted her focus this year to the Alibaba share sale. In addition, the Web portal is letting people turn off the requirement to enter a password, and instead giving them the option to verify their identity via the application.

Still, some analysts doubt these initiatives will be enough to reverse the company’s trajectory. “She’s focused on product, but nothing material has come of it,” said Sameet Sinha, an analyst at B.

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