Mayer has US$12B to bring Yahoo ‘back to greatness’
Yahoo! Inc. chief executive Marissa Mayer has a message for investors: We hear you.
In a conference call following the Web portal’s third-quarter earnings results on Tuesday, Ms. Mayer worked to soothe shareholder fears over the company’s turnaround, its acquisition strategy and how it was handling valuable stakes in Asian companies, as well as cash.
The CEO detailed how Yahoo has bought back 24% of shares since late 2012, how the company’s dealmaking has been “meaningful,” talked up mobile opportunities, and said the Web portal has been focused on cost efficiencies.
Ms. Mayer said she realized that although the latest results comfortably beat expectations, one quarter isn’t enough to erase doubts about Yahoo. She said it remains the goal of the company’s management team to “bring an iconic company back to greatness.”
And Yahoo at least has the resources to make things interesting again, thanks to a growing mountain of cash, more than doubled in size in the latest quarter after its sale of part of its stake in Chinese e-commerce company Alibaba Group Holding Ltd.
“I have great confidence in the strength of our business,” Ms. Mayer said on the call, adding that she was “proud” of how the company has performed. “Our focus is on sustainable market-share gaining growth.”
The comments amount to a defense of the CEO’s strategy as Ms. Mayer faces pressure from activist investor Starboard Value LP. Last month, Starboard questioned Ms. Mayer’s leadership and called for a breakup of the Sunnyvale, Calif.-based company, in order to unlock more shareholder value. Starboard also asked that Yahoo cease further dealmaking and cut costs.
At the time, Ms. Mayer said she would elaborate on plans in Tuesday’s earnings call.
Starboard didn’t immediately respond to a request for comment.
The CEO made her remarks after reporting third-quarter sales that topped estimates. Revenue, excluding sales shared with partner websites, was US$1.09-billion for the period. That was up 1.5% from a year earlier and topped analysts’ average estimate of US$1.05-billion. For the current quarter, Yahoo forecast revenue of US$ 1.14billion to US$1.18-billion, compared with analysts’ average estimate of US$1.17-billion.
“To have 1% growth be better than expected says something about Yahoo at the moment,” said Ben Schachter, an analyst at Macquarie Securities USA Inc. “It’s good to see the right trajectory, but it doesn’t change the story dramatically.”
Yahoo shares rose as much as 4.8% in extended trading, after closing at US$40.17 in New York. For the third quarter, profit, excluding items such as
To have 1% growth be better than expected says something about Yahoo at the moment
stock-based compensation, was US52¢ a share. Analysts had projected US30¢ a share. Net income attributable to Yahoo was US$6.77-billion, up from US$296.7-million a year earlier.
The company got a one-time boost of more than US$9-billion before taxes last month from a sale of part of a stake it owns in Alibaba, which still makes up more than half of Yahoo’s valuation. Yahoo said it’s paying about US$3.3-billion of taxes related to the share sale.
The company ended the quarter with US$12-billion in cash, compared with US$5 billion as of Dec. 31.
Mobile products showed particular progress. Ms. Mayer said mobile revenue was more than US$200-million in the third quarter and estimated gross revenue in mobile will exceed US$1.2-billion this year. Yahoo’s main online advertising business — display ads — fared less well. Display revenue for the quarter was US$447million, down 5% from a year earlier.