Earnings Preview: Yahoo to report 3Q results

Yahoo's 3rd-quarter report likely to cast spotlight on CEO Marissa Mayer's turnaround strategy

Associated Press

SAN FRANCISCO (AP) -- Yahoo's third-quarter earnings are likely to be overshadowed by CEO Marissa Mayer's first public discussion about her plan to turn around the long-struggling Internet company.

WHAT TO WATCH FOR: The latest quarterly snapshot, due to be released Monday after the stock market closes, will provide Mayer with a platform to elaborate on her strategy. In a surprise move, Yahoo announced Mayer's hiring the day before its second-quarter earnings came out in mid-July. She didn't participate in the company's review of those results.

Since defecting from Google Inc. to join Yahoo Inc., Mayer so far has only shared some of her ideas in internal company meetings.

Analysts and investors are hoping Mayer will be more forthcoming during the conference call, which is coming just three weeks after she gave birth to a boy. The arrival of Mayer's first child has raised questions about how well she will be able to juggle the challenges of dealing with an infant at the same time she is trying to figure out how to revive Yahoo's revenue growth.

Mayer, 37, ended her brief maternity leave earlier this week and punctuated her return to Yahoo's Sunnyvale, Calif., headquarters by announcing she had recruited one of Google's top advertising executives to join her. Henrique de Castro, who currently oversees a division that manages Google's advertising relationships, will become Yahoo's chief operating officer by Jan. 22.

To lure him away from Google, Mayer gave de Castro a compensation package valued at about $58 million. The amount seemed to underscore Mayer's willingness to spend more money to attract talented employees and build online services that will persuade Yahoo's roughly 700 million monthly visitors to stick around the website for longer periods of time so they can see more ads.

Mayer had already signaled that she is loosening Yahoo's purse strings by adopting Google's policy of providing employees with free meals. She also is giving Yahoo workers free smartphones and has replaced cost-cutting specialist Tim Morse as the company's chief financial officer.

Based on information leaked to media outlets and technology blogs, Mayer also has been drawing up plans to redesign Yahoo's home page.

Yahoo's third-quarter results are expected to illustrate why Mayer needs to make drastic changes.

As has been the case since late 2008, the numbers are supposed to show little growth or a decline in Yahoo's ad revenue at a time when a bigger portion of marketing budgets shifts to online promotions. Most of those dollars, though, have been flowing to Google and Facebook.

The malaise has infected Yahoo's stock, which has been stuck in a funk since the company squandered an opportunity to sell itself to Microsoft Corp. in 2008 for $47.5 billion, or $33 per share. The stock hasn't traded above $20 in more than four years. The shares have ranged from $14.59 to $16.38 since Mayer became CEO.

Mayer is trying to placate frustrated stockholders by distributing most of the proceeds from a $7.6 billion deal that sold half of Yahoo's stake in Alibaba Group, one of China's Internet stars. Analysts may press her for more details on the timing for buying back more company shares or paying a special dividend.

THE BIG PICTURE: Despite its headaches, Yahoo remains a well-known brand with one of the Internet's most popular destinations. If the company can rebound under Mayer, it could spur more competition and unleash more innovation that could benefit consumers. A comeback would also help the economy by creating more jobs and generating more shareholder wealth.

WHAT'S EXPECTED: Analysts polled by FactSet project earnings of 26 cents per share on revenue of $1.08 billion, after subtracting Yahoo's ad commissions.

LAST YEAR'S QUARTER: Yahoo earned $293 million, or 23 cents per share, on net revenue of $1.07 billion a year ago.

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