Yahoo Shares Fall On Weak Revenue Trends, Turnaround Concerns
Last Update: 7/21/2010 12:26:40 PM
By Shara Tibken Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of Yahoo Inc. (YHOO) took a hit Wednesday as investors expressed displeasure with the Internet giant's weak second-quarter revenue and guidance and worried the company's long-running turnaround effort still isn't having much impact.
Late Tuesday, Yahoo said its second-quarter earnings jumped 51%, but overall revenue fell short of expectations as the company was hurt by an unexpected pullback by some advertisers in display advertising during the latter part of June.
While the company has improved profitability by cutting costs and making other changes, concerns still abound, with investors worrying the actions aren't enough.
"Investors have been waiting for years for Yahoo to find some way to unlock value from its global Internet operations," Benchmark analyst Clayton Moran said. Investors to some extent have lost patience with Yahoo's efforts and want to see more dramatic change, he said.
"I also think investors are maybe coming to the conclusion this is a ship that can't be righted," Moran said.
In recent trading, Yahoo shares dropped 8% to $13.03, down more than 20% over the past three months.
Since Chief Executive Carol Bartz took Yahoo's helm at the beginning of last year, she has sloughed off noncore businesses and kept focus on only a few key operations. In the most-recent period, Yahoo announced multiple partnerships and takeovers that pushed it further into content generation, social-networking games and the mobile-phone market. The board also approved a $3 billion share buyback, representing about 15% of the company.
Late Tuesday, Yahoo posted a profit of $213.3 million, or 15 cents a share, up from $141.4 million, or 10 cents a share, a year earlier. Analysts surveyed by Thomson Reuters predicted 14 cents.
Total revenue rose 1.8% to $1.6 billion, the low end of April's forecast, as revenue excluding traffic-acquisition costs--commissions paid to marketing partners--slipped 0.7% to $1.13 billion.
Yahoo also projected revenue for the third quarter of $1.57 billion to $1.65 billion, the midpoint of which is below the average analyst forecast of $1.64 billion.
While investors were disappointed in the results, analysts said several things are going right for Yahoo, such as its display-advertising growth and improving margins.
Still, Citi analyst Mark Mahaney cut his rating on Yahoo to hold, saying he's concerned Yahoo's "shareholder friendly" actions aren't enough to make up for "so-so" revenue trends and other factors.
And Jefferies analyst Youssef Squali said Yahoo "remains cheap and management is doing many of the things needed to fix the company, but it will require patience for the stock to work in the end."
-By Shara Tibken, Dow Jones Newswires; 212-416-2189; email@example.com
(Scott Morrison and Amir Efrati contributed to this report.)