By Douglas MacMillan
Without the life jacket of Alibaba, can Marissa Mayer stay
afloat?
In the week marking Mayer's two-year anniversary as Yahoo's
chief executive, investors may cast their vote on whether they
believe her attempt to turn around the aging Internet portal is
working.
Yahoo's second-quarter earnings, expected after the close of New
York trading Tuesday, will likely be the first time in more than a
year the company announces results without simultaneously
disclosing any materially new numbers related to Alibaba, the
Chinese e-commerce giant in which it owns a 24% stake. (Alibaba
already opened its books in May, when it filed for an initial
public offering.)
That means Mayer will no longer be able to hide sluggish growth
in Yahoo's core business, which analysts expect to produce revenue
of $1.08 billion, up 1% from a year ago, and 38 cents a share in
profit, up from 35 cents a year ago.
Mayer and finance chief Ken Goldman will appear on a video
conference call with analysts at 5 p.m. ET. Any details they share
about the planned sale of 40% of Yahoo's stake in Alibaba in its
IPO, and any hints about what they plan to do with the proceeds,
will be closely watched.
Here are the key issues to watch for:
Advertising growth
Yahoo in April reported growth in its core business of display
ads for the first time since Mayer took the reins in July 2012. Now
we'll see if that was a fluke or if the CEO is winning back the
marketing dollars her company has lost to Google and Facebook and
moving ad growth further into the black.
Video
Some of Mayer's biggest bets of the year have gone toward
building an online video portal to rival Google's YouTube, such as
her acquisition last week of video-streaming startup RayV and her
high-profile move to bring the sixth season of beloved TV sitcom
"Community" exclusively to Yahoo. But she still hasn't said much
about how soon this effort could generate material returns.
Alibaba proceeds
Analysts have estimated Yahoo could net as much as $10 billion
from the sale of its Alibaba stake, and investors are thirsty for
any indication of what Mayer intends to do with that money. While
the CEO has only said the company plans to be "good stewards" of
the capital - a hint that she's likely to distribute much of it to
shareholders through buybacks or a dividend - she could tip more of
her hand now that the IPO is coming into view. Is a
multibillion-dollar acquisition, such as AOL, in the offing? "There
will be a lot of people trying to read the tea leaves," said Brian
Wieser, analyst at Pivotal Research.
Alibaba tax bill
Yahoo paid a hefty tax bill the last time it sold a portion of
its Alibaba stake in 2012, and analysts expect it will again have
to pay a full 35% rate on its capital gains. But CFO Goldman has
said he's researching tax-avoidance schemes that could lower this
bill, and shareholders will be listening closely on Tuesday's call
for any suggestion Yahoo is pursuing one of these strategies.