Yahoo misses estimates as ad money flows to rivals
Yahoo predicted sales that fell short of analysts’ estimates after Internet users and advertisers shifted to social-networking sites and Google.
Excluding revenue passed on to partner sites, fourth-quarter sales will be $1.13bn to $1.23bn Yahoo said today in a statement. Analysts had estimated $1.25bn on average, according to data compiled by Bloomberg.
Chief Executive Officer Carol Bartz, who began leading a turnaround effort in January 2009, has failed to gain market share from Google and now faces rising competition from Facebook and other social-networking sites.
“The company’s still under a fair amount of pressure,” Colin Gillis, an analyst at BGC Partners LP in New York who has a hold rating on the shares.
"The company uses ad formats that are less popular among advertisers, and it lacks social- networking features, he said. “Yahoo still looks like a 1.0 property in a 2.0 world.”
Yahoo was little changed in late trading after the announcement. Earlier today, the shares fell 44 cents to $15.49 on the Nasdaq Stock Market. The stock jumped 12pc last week, spurred by renewed buyout speculation.
Yahoo, which spurned an acquisition bid from Microsoft in 2008, is working with Goldman Sachs Group to help defend against possible takeover approaches, said three people familiar with the matter last week.
AOL has talked with private-equity companies, including Silver Lake, about a possible bid, two people familiar with the matter said.
Discussions between AOL and the private-equity firms are preliminary and have focused on a possible purchase of parts of Yahoo, two of the people said. Neither AOL nor the private-equity firms have made a proposal to Yahoo, the people said.
“They’re not benefiting like Google is from being a global company,” said Jason Helfstein, an analyst at New York-based Oppenheimer & Co who rates Yahoo’s stock “perform” and doesn’t own it.
“I think the stock is trading on: ‘Does something happen with the company?’”
Net income attributable to the company more than doubled to $396.1m, or 29 cents a share, from $186.1m, or 13 cents, a year earlier.
Yahoo gained 13 cents from the sale of its HotJobs site and had a 4-cent benefit a year earlier from an investment in Alibaba.com. Analysts had estimated 15 cents on average.
Excluding revenue passed on to partner sites, Yahoo had third-quarter sales of $1.12bn, missing the $1.13bn predicted by analysts.
While more internet users are getting their news and information from social-networking sites, Yahoo remains the most popular US web portal, according to ComScore.
Yahoo has been trying to take advantage of the social- networking trend by forming partnerships with other sites. Users can now see their Facebook updates without leaving the home page of Yahoo.
In September, the company announced plans to integrate its website with Twitter’s service. And earlier this year, Yahoo forged a deal with Zynga Game Network to let applications such as “FarmVille” and “Mafia Wars” run on Yahoo’s sites.
Bartz also has closed poor-performing websites and farmed out Yahoo’s internet search business to Microsoft.
The companies’ 10-year agreement puts Microsoft’s Bing search engine on Yahoo, creating a bigger competitor to Google.
“We’re making progress,” Yahoo Chief Financial Officer Tim Morse said in an interview. “We’re very happy with the strategy, and we’re focused on executing.”
For now, Google has maintained its dominance. Its share of US searches climbed to 66.1pc last month, from 65.4pc in August, according to ComScore. Yahoo fell to 16.7pc from 17.4pc, while third-place Microsoft rose to 11.2pc from 11.1pc.
Yahoo’s display ads, such as banners and videos, jumped 17pc last quarter. Still, that’s a slowdown from the second quarter, when display ads climbed 19pc. Internet-search revenue on its sites declined 7pc in the third quarter from the year-earlier period.
The company also has stepped up stock buybacks. Yahoo has repurchased more than 7pc of its shares this year, Bartz said.