USA TODAY US Edition
Rough going continues for Yahoo
House that Mayer rebuilt remains a work in progress
Baseball playoffs are in full swing, so please indulge me in making a comparison to the financial state of Yahoo.
The old Yankee Stadium was famously deemed the house that Ruth built, a paean to the great home run-hitting Babe Ruth. Yahoo, for better or worse the past few years, is the house that Yahoo CEO Marissa Mayer is trying to rebuild after years of disrepair and neglect.
As major reclamation projects go, it’s a work in progress, if Tuesday’s third-quarter results for Yahoo are any indication.
Against a backdrop of executive defections and middling online ad sales, the Internet media giant reported improved revenue but earnings that fell short of analyst estimates: $1.226 billion and adjusted earnings of 15 cents per share. Quarterly losses for operations totaled $86 million.
Analysts expected Yahoo to deliver revenue of $1.024 billion and earnings per share of 16 cents, according to a consensus forecast compiled by FactSet.
Shares were down 1% to $32.49 in after-hours trading; the stock was down 2% to $32.82 at the close of regular trading Tuesday.
For Mayer, now in her fourth year at the helm, it’s just another rough quarter with little relief in sight.
Yahoo continues to lose the digital ad wars. This year, its take of the worldwide market will sink to 2% (or $3.37 billion) from 2.4% ($3.45 billion) in 2014, according to eMarketer. Facebook’s share, meanwhile, is expected to improve to 9.6% from 8% last year. Market leader Google will decrease slightly this year, to 30.4%.
Mobile ads remain a focus of Yahoo, but it owns a paltry slice (2.9%) of the $30.45 billion U.S. market, which is expected to drop to 2.5% in 2016. For 2015, Google is at 32.9%, Facebook at 19.4%.
“Yahoo is growing in the mobile space but not strong enough to keep pace with the market rate,” says Martin Utreras, senior forecasting analyst at eMarketer.
The worries don’t end there. Jittery analysts, many of whom believe Yahoo shares are undervalued, want to learn more about Yahoo’s planned spinoff of its stake in Chinese e-retailing giant Alibaba. They see potential, even though the Internal Revenue Service did deem it a tax-free move in advance of the spinoff. Tuesday, Mayer said the spinoff probably won’t happen until January.
Yahoo continues to experience “revenue headwinds in core businesses,” Mayer said in a conference call Tuesday.
There was good news: Yahoo signed a three-year, non-exclusive deal with Google to provide search ads. But that didn’t stop a drop in after-hours trading.
A turnaround remains elusive for Mayer. To borrow another baseball analogy, Yahoo’s big hit of the day was quickly erased. And so it goes for the struggling tech giant.