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Yahoo Acquires Ptch

Zacks Equity Research

Yahoo Inc. (YHOO) recently announced that it has acquired Ptch, the Dreamworks Animation-backed mobile photo and video editing app. The app was unveiled a year ago and will no longer be available from Jan 2, 2014 onwards.

Ptch was initiated by DWA (DreamWorks Animation), a company funded by DreamWorks. Though nothing has been officially said about the future of DWA, it will likely be dissolved, going forward.

The Ptch app enables users to remix their videos with effects and music and offers the original clips to others in order to remix them further. The concept was developed with a view to allow friends and people with shared experiences to use all of their combined media to draft the ‘story' of the event.

With this acquisition, Yahoo! seems to continue with its strategy of restructuring all of its offerings to make them more mobile-centric in nature. As a means of achieving the aforesaid target, it is acquiring small firms with strategic value of some sort.

With this acquisition, Yahoo! has taken its year-to-date acquisition tally to 24. Yahoo! acquired microblogging platform Tumblr in June, followed by the acquisition of mobile advertising specialist AdMovate a month later. It recently acquired natural language processing firm, SkyPhrase.

In the third quarter of 2013 alone, Yahoo purchased eight companies, including Lexity, Rockmelt and Xobni, with the net cash impact of those purchases totaling $163 million.

Yahoo’s search business continues to show signs of improvement, even in the face of tough competition from Facebook (FB), Google (GOOG) and Microsoft (MSFT). Currently, Yahoo has a huge task at hand, which is to retain and add to its user base and make them spend more time on its properties. This would play an important role in bringing back advertisers as well.

However, inability to protect user information could damage its reputation and affect credibility, thus slowing down financial growth and pulling down stock prices in the process.

Currently, Yahoo has a Zacks Rank #3 (Hold).

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