Yahoo earnings plummet as investors wait for Alibaba share sale

Joe Hall
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Yahoo chief exec Marissa Mayer. (Source: Getty)

The figures

Yahoo fell short of Wall Street’s earnings expectations in the first quarter of 2015, posting earnings per share of $0.15 below the predicted $0.18.
Shares in the technology company immediately dropped two per cent in after-hours trading as investors swallowed a 93.3 per cent fall in net earnings from $312m (£208.9m) to $21m.
Yahoo chief executive Marissa Mayer was more keen to divert focus towards an eight per cent rise in revenue to $1.2bn driven by a 20 per cent increase in search revenue as a partnership with Mozilla led to a five-year high in search volume. Analysts had predicted revenue would fall around three per cent.
Sales excluding the cost of acquiring traffic fell to $1.04bn compared to $1.08bn at the same time last year.
Mayer has argued the company is in the midst of a “multi-year transformation” and seems intent on shifting its efforts towards search - which accounted for 35 per cent of the firm’s sales last year - and mobile.
Mobile revenue jumped from $145m in the first quarter last year to $234m, representing 21 per cent of all traffic-driven revenue.

Why it’s interesting

Despite Yahoo’s stuttering performance in recent years, the company has retained value to investors due to the wealth of Asian assets it owns.
The company has announced its plans to sell off nearly $40bn of holdings in Alibaba this year - a move cheered by investors - yet there were no updates to the plan or time frame for the sale included in the most recent earnings release. Nor was any info included on its plans for its stake in Yahoo Japan.
Unlike the sale of 140m Alibaba shares in September, the forthcoming sale will be tax-free further perking investors’ interest. Information on the sale could have helped offset some of the disappointing top line figures.

What Yahoo said

We are tightly managing our overall cost structure as EBITDA remains a key measurement for the Company.
In Q1 2015, we took actions to optimize functions, remove inefficiencies and align resources to help focus our organizations on top priorities. We plan to continue to actively manage our cost base to grow profitability and EBITDA over time.
- Yahoo chief financial officer Ken Goldman

In short

Yahoo’s transformation is taking longer than many investors would like.

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