By Brian Womack - Oct 19, 2011 7:17 AM GMT+0700
Yahoo! Inc., the U.S. Web portal exploring strategic options after firing Chief Executive Officer Carol Bartz, reported third-quarter profit that beat estimates as the market for online advertising expanded.
Profit excluding some costs was 21 cents a share, topping the average 17-cent estimate compiled by Bloomberg. Net income attributable to the company fell 26 percent to $293.3 million, or 23 cents, from $396.1 million, or 29 cents, a year earlier, Sunnyvale, California-based Yahoo said in a statement.
Yahoo ousted Bartz in September after the company failed to keep pace with ad growth at Google Inc. (GOOG) and Facebook Inc. Since then, “multiple parties” have expressed interest in the company, according to a memo last month by co-founder Jerry Yang. U.S. online ad spending is expected to grow 20 percent this year, to $31.3 billion, according to EMarketer Inc., helping Yahoo revenue even as market share slips.
“Business is not as bad as people thought,” said Sameet Sinha, an analyst with B. Riley & Co., who rates the stock “buy” and doesn’t own it.
The shares rose as much as 4.3 percent to $16.14 in extended trading. Yahoo earlier fell 1.5 percent to close at $15.47 in New York trading. The stock has declined 7 percent this year.
‘In Line’
“I think people were fearful that the quarter would be disappointing, and essentially it was in line,” said Clay Moran, an analyst at Benchmark Co., who has a “hold” rating on Yahoo.
Third-quarter revenue, excluding sales passed on to partner sites, fell 4.6 percent to $1.07 billion, matching the average analyst estimate, according to Bloomberg data.
In Asia, revenue excluding sales passed to partners surged 20 percent to $221.6 million. Sales in the Americas region dropped 12 percent to $753.7 million.
“It’s the international piece, I think, that really saved the day for them,” Sinha said.
Fourth-quarter revenue, excluding sales passed to partner sites, will be $1.13 billion to $1.24 billion. Analysts had estimated $1.21 billion, according to Bloomberg data.
The company also said it recently agreed to extend a revenue per search agreement with Microsoft Corp. in the U.S. and Canada through 2013.
Yahoo is struggling to keep users on its sites, trailing some rivals. U.S. Web surfers spent 9.9 percent of their time on Yahoo in September, compared with 10.2 percent for Google, owner of the world’s most popular search engine, according to Reston, Virginia-based ComScore Inc. Facebook, the largest social- networking site, captured 14.7 percent.
Advertising Shift
Advertisers are shifting more focus to competing sites as well. Yahoo’s share of display ads, including banners, will be 13.1 percent this year in the U.S., down from 14.4 percent last year, estimates New York-based EMarketer Inc. Facebook’s share will climb to 16.3 percent, up from 12.2 percent. And Google should have 9.3 percent, an increase from 8.6 percent.
Display ad revenue, excluding sales passed to partners, was $449 million in the quarter, little changed from $448 million a year earlier. Display sales rose 4.9 percent in the second quarter.
Bartz, who had aimed to compete better with rivals, left the company amid mounting investor frustration over failed turnaround efforts. The company appointed Tim Morse, who had served as chief financial officer, as interim CEO and said it would implement a strategic review to revive growth.
Game Plan
“We’re just focused on what we can control,” Morse said in a telephone interview today. “We’re really working on our underlying technology, our interface with advertisers, our products, our partnerships. That’s the game plan, and we’re just going to keep our heads down and focus on that.”
Yahoo has drawn an increasingly crowded field of potential bidders for the company. KKR & Co. and Blackstone Group LP are among the private-equity firms considering possible bids for Yahoo, according to people with knowledge of the matter last week.
In addition, Alibaba Group Holding Ltd., a Chinese e- commerce company whose biggest shareholder is Yahoo, has discussed a plan with Silver Lake and Russia’s Digital Sky Technologies to make a joint bid, people familiar with the matter have said. Another group that is interested in a possible offer includes Providence Equity Partners Inc. and former News Corp. executive Peter Chernin, people said.
Yahoo advisers view the Silver Lake group and the Providence group as the two likeliest buyers, with Alibaba and private-equity funds joining one of the efforts, a person said.
“The board is actively looking at the full range of options available to return the company to a path of robust growth and industry-leading innovation,” Morse said on a conference call with analysts. “The board also has said that when it has something to announce, it will do so. That will take time.”
To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.
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