Yahoo’s 4th-quarter results dragged down by revenue drop


Yahoo Inc's revenue during the last three months of 2013 declined for the fourth consecutive quarter as weak online display ad sales weighed on results. (Robert Galbraith/Reuters)
January 28

Yahoo chief executive Marissa Mayer insists that the long-stumbling Internet company has finally regained its stride, even though its revenue is stuck in reverse.

The latest evidence of the challenges facing Mayer emerged Tuesday with the release of Yahoo’s fourth-quarter results.

While Mayer hailed product improvements that have helped attract more traffic to Yahoo’s services, investors focused on a drop in revenue that underscored the difficulty that the company is having competing for online advertising against Google, Facebook and other rivals.

Yahoo had hoped to shift the financial tide when it lured Mayer away from a top job at Google 18 months ago.

Mayer, 38, has succeeded in creating a bigger buzz around Yahoo with her panache and a series of acquisitions aimed primarily at the mobile-device market. But the signs of a sustainable turnaround remain elusive. She has repeatedly said that it may take several years for Yahoo’s ad sales to surge, but on Tuesday she promised a “modest acceleration” in revenue growth during the second half of 2014.

Revenue dropped 6 percent in the fourth quarter, the same rate of decline experienced for 2013.

Yahoo’s earnings have been steadily rising under Mayer’s leadership because of cost-
cutting measures and lucrative investments in two Asian Internet companies: China’s Alibaba Group and Yahoo Japan. Both investments were made before Mayer’s arrival. The income from those two investments accounted for nearly two-thirds of the company’s earnings during the final three months of last year.

Yahoo, based in Sunnyvale, Calif., earned $348 million, or 33 cents per share, a 28 percent increase from $272 million, or 23 cents per share, a year earlier.

Excluding certain one-time items, Yahoo earned 46 cents per share. That figured topped the average estimate of 39 cents per share among analysts surveyed by FactSet.

Revenue fell 6 percent, to $1.27 billion. After subtracting commissions paid to Yahoo’s ad partners, revenue totaled $1.2 billion, in line with analysts’ projections.

Yahoo’s 24 percent stake in Alibaba has been particularly valuable, because the Chinese company is still growing rapidly as it prepares for an initial public offering of stock. Numbers released Tuesday by Yahoo revealed that Alibaba’s revenue surged 51 percent in the third quarter. There is a one-quarter lag between when Alibaba closes its quarter and Yahoo collects its share of Alibaba’s earnings.

Alibaba’s allure is the main reason Yahoo’s stock has more than doubled since Mayer became chief executive.

On Tuesday, Yahoo’s shares slipped $1.28, or 3.4 percent, to $36.94 in extended trading after the fourth-quarter numbers came out.

Mayer appears to be getting frustrated, too. This month, she dismissed Chief Operating Officer Henrique de Castro, who was in charge of the company’s advertising. Mayer had enticed him away from Google in late 2012 with a pay package valued at the time at $58 million.

“Ultimately, Henrique was not a fit,” Mayer said Tuesday during an online video review of the company’s fourth-quarter performance. She added that she doesn’t plan to replace de Castro so that she can become more deeply involved Yahoo’s ad sales.

— Associated Press

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