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Yahoo advances as CEO sees growth in technology

Date

Douglas MacMillan

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Yahoo rose to the highest price in a year on Tuesday after new chief executive Marissa Mayer outlined her turnaround strategy for the biggest US web portal, emphasising mobile technology and personalised services.

Mayer aims to grow as fast as competitors in online search, display advertising, mobile applications, and products such as email, she said on Monday on her first call with analysts since being named CEO in July. Yahoo earlier reported third-quarter profit and sales that topped analysts' estimates.

The company's fifth CEO in four years plans to reverse three straight annual sales declines by recharging growth in existing businesses. Mayer plans to focus on small acquisitions of less than $US100 million rather than large deals, and expects to move workers around within Yahoo instead of cutting large groups of employees, she said.

"Marissa Mayer has taken baby steps to improve operations at Yahoo," said Kevin Stadtler, president of Stadtler Capital Management in Fort Worth, Texas, who manages $US6.5 million in assets, including Yahoo. "Large acquisitions are not necessary to resume top-line growth."

Mayer sees the company focusing on sites and technologies that are "daily habits" for consumers, such as checking email and stock tickers, she said on the conference call.

"Our vision and direction for Yahoo is to make the world's daily habits inspiring and entertaining," Mayer said. "We'll become a growth company by inspiring and delighting our users."

The CEO plans to invest in hiring engineers with expertise in mobile applications, boosting the company's technology for buying and serving ads, and building services that are more personalised for individual users.

Yahoo climbed 5.7 per cent to $US16.67 in New York, the highest closing price since October 24, 2011. The stock has gained 3.3 per cent this year.

Third-quarter profit, excluding some items, was 35 cents a share, the Sunnyvale, California-based company said in a statement. Sales, excluding revenue passed to partner sites, increased 2 per cent to $US1.09 billion. Analysts on average had estimated profit of 26 cents on revenue of $US1.08 billion, according to data compiled by Bloomberg.

Profit got a boost as expenses fell after the company eliminated jobs, and sales of advertisements alongside search results increased at a faster pace than display-type ads.

"We've been through a couple rounds of cost-cutting, so this is a product of that," said Brett Harriss, an analyst at Gabelli & Co. "It's nice that they didn't disappoint for once."

Net income attributable to Yahoo rose to $US3.16 billion, or $US2.64 a share, from $US293.3 million, or 23 cents, a year earlier. Income in the 2012 period included a net gain of $US2.8 billion related to the sale of a stake in Alibaba Group.

In a departure from past practice, Yahoo didn't provide an outlook for sales and operating income. Google, Mayer's former employer, also doesn't issue earnings forecasts.

Bloomberg

3 comments so far

  • Stadtler Capital Managment manages a paltry $6.5m in assets but is considered of sufficient stature and acumen to provide an analysis of Yahoo?!

    Commenter
    Pat
    Date and time
    October 24, 2012, 12:21PM
    • "The company's fifth CEO in four years plans to reverse three straight annual sales declines by recharging growth in existing businesses..."

      Typical CEO speak. I'll give credit and suggest she actually outlined some 'plan' for 'recharging growth' rather than that being the plan. Otherwise there's been not a single definitive statement as to what the intent is actually supposed to be. Play pot luck with start-ups? Sounds like the organisation is just a source of funding for VC plays.

      Commenter
      MikeB
      Date and time
      October 25, 2012, 6:54AM
      • I used to use Yahoo for a lot of stuff but now I only use them for some hosting. I pay $130 year to host my personal web site. Generally I'm happy with the service. There's some economies of scale that they have which enables them to keep the price down. If AWS keeps dropping it's prices however (it's $132 per year to run a micro tier linux box which I could put whatever I wanted on it - not just limited to PHP) I might change over.

        They have seemed a bit slow and not particularly innovative of late. Having this new fresh looking woman at the helm seems to be doing wonders for their image however and her strategy appears to be having a positive impact. Maybe they could change their name to Yipee or Booyah to spice things up a bit (no-one says Yahoo anymore more).

        Commenter
        Jacorb Effect
        Date and time
        October 25, 2012, 8:09AM

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