Yahoo Posts Another Loss, Highlighting Hurdles for Potential Buyers--Update
July 18 2016 - 5:47PM
Dow Jones News
By Douglas MacMillan
Yahoo Inc. on Monday posted a deep loss that underscores the
setbacks facing a potential acquirer of the shrinking internet
business.
In what could be its last earnings report as an independent
company, Yahoo on Monday said its revenue, minus commissions paid
to partners for Web traffic, fell 19% in the second quarter. That
is its sixth decline in the past seven periods.
The company is expecting to review a third and potentially final
round of bids from suitors of its web properties in the coming
days, people familiar with the matter have said, a process that has
lasted months and whittled a field of dozens of potential buyers
down to a handful of serious contenders.
The remaining bidders, which are expected to include Verizon
Communications Inc. and private-equity firm TPG, have expressed
concerns about the flagging financial prospects of Yahoo, which
continues to cede share of the online-ad market to Alphabet Inc.
and Facebook Inc.
On Monday, Yahoo's shares rose 0.8% in after-hours trading to
$38.25.
Yahoo's earnings report card comes almost four years to the day
after it announced with great fanfare that Marissa Mayer would be
chief executive. Ms. Mayer hoped to turn around Yahoo by refreshing
the company's talent through acquisitions and by boosting
investment in video and web search.
But Yahoo hasn't shown much growth during that time, making it
difficult for the company to fetch a high price for its core
business. Overall during the quarter, revenue rose 5.2% to $1.31
billion, helped by a change in how the company reports revenue.
Without that change, revenue would have declined 15% to $1.06
billion. Analysts had called for $1.08 billion.
The internet company posted a loss of $439.9 million, or 46
cents a share, compared with a year-earlier loss of 2 cents a
share. Adjusted earnings were 9 cents a share, just below analysts'
expectations of 10 cents.
The segment of Yahoo's business that Ms. Mayer touted would
drive the company's growth has slowed dramatically, though it
showed an uptick in the latest period. Revenue from "Mavens" -- a
financial metric the company introduced last year to track mobile,
video, native and social ads -- rose 26% to $504 million. That
compares with 6.8% in the first quarter, 26% in last year's fourth
quarter, 43% in the third period and 60% in the second quarter of
2015.
Yahoo said it ended the quarter with $7.67 billion in cash, up
from $7.1 billion three months earlier.
Yahoo's core business is difficult to value because the majority
of its roughly $36 billion market value is attributed to its
valuable stakes in Alibaba Group Holding Ltd. and Yahoo Japan.
Brian Wieser, analyst at Pivotal Research, estimates the core
business is worth about $3.5 billion. Some earlier bids came in as
low as $3 billion, people familiar with the process told The Wall
Street Journal in May.
The buyer of the core business may ultimately decide not to buy
certain assets like real estate and patents. Yahoo has also set
aside about 3,000 patents into a subsidiary called Excalibur and
hired an investment bank, Black Stone IP, to auction it.
A sale of Yahoo's web properties would likely mark the end of
Ms. Mayer's helm as CEO, a tenure marked by high expectations
around her turnaround plan and her subsequent failure to produce
products that attracted users and advertisers.
Ms. Mayer's decline was accelerated over the past few months
amid a battle with activist investor Starboard Value LP. After Ms.
Mayer failed to rein in costs, Yahoo's board struck a deal to give
Starboard nearly half of its board seats.
Write to Douglas MacMillan at douglas.macmillan@wsj.com
(END) Dow Jones Newswires
July 18, 2016 17:32 ET (21:32 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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