accumulate unambiguity: Yahoo profit rises, but revenue falls

Thursday, April 18, 2013

Yahoo profit rises, but revenue falls - MarketWatch

By Benjamin Pimentel, MarketWatch

SAN FRANCISCO (MarketWatch) ? Shares of Yahoo Inc. on Tuesday fell sharply in late trading after the Web portal reported a gain in profit, but posted a decline in sales, missing Wall Street?s estimates.

Yahoo /quotes/zigman/59898/quotes/nls/yhoo YHOO -0.38% was down 4.5% in after-hours trading. A key factor was its dismal display ad revenue, said BGC Partners analyst Colin Gillis.

?Display was a relative disaster,? he told MarketWatch.

The company reported a first-quarter profit of $390.9 million, or 35 cents a share, compared with a profit of $286.3 million, or 23 cents a share, in the year-earlier period.

Revenue excluding traffic acquisition costs was $1.07 billion, compared to $1.08 billion in the same period the previous year. Adjusted profit was 38 cents a share.

Analysts polled by FactSet on average were expecting the Web portal to post a profit of 25 cents a share on revenue of $1.1 billion.

In a statement, Yahoo Chief Executive Marissa Mayer said, ?We saw continued stability in our business, strengthened our team, and started the year with fast execution against our products and partnerships.?

But analysts quickly pointed out problems in Yahoo?s core display business. Adjusted revenue for that business totaled $402 million, down 11% from the year-ago quarter. Gillis said Wall Street?s consensus estimate was for revenue of about $432 million.

Yahoo's ad struggles persist

Yahoo reports its first-quarter earnings with a 36% jump in profit while quarterly revenue falls 7% from a year ago as Yahoo's core online-advertising business deteriorates. (Photo: Getty Images)

On the other hand, Yahoo?s financials continued to get a lift from its Asian assets. Profit from its equity interests, which make up mainly earnings from Yahoo Japan and Alibaba, jumped sharply to $217.6 million from $172.2 million in the year-earlier period.

?If you own Yahoo because you want exposure to Alibaba and Yahoo Japan, then you?re fine,? Gillis told MarketWatch. ?If you own Yahoo because the core business is turning around, you gotta be worried with display because that?s the one thing they completely control.?

However, on a call with analysts, Mayer said she was optimistic about Yahoo?s ability to grow display ad revenue.

?It?s a series of sprints and a chain reaction,? she said. ?While I don?t want to put a precise timeline on it, we do anticipate we will see some growth already in the second half of the year.?

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