Wednesday, January 29, 2014

(BN) Yahoo’s Mayer Fails to Revive Growth 18 Months Into Job

(Bloomberg ) Yahoo! Inc. (YHOO) Chief Executive Officer Marissa Mayer has failed to spur growth at the Web portal 18 months after taking the job -- and the outlook isn't improving as advertisers continue spending their money elsewhere.

First-quarter sales, excluding revenue passed to partner sites, will be $1.06 billion to $1.1 billion in the current quarter, the Sunnyvale, California-based company said yesterday in a statement. The middle of that range would represent growth of less than 1 percent from $1.07 billion a year earlier. Shares fell in late trading.

Mayer, who left Google Inc. (GOOG) in July 2012 to turn around Yahoo, is struggling to win ad sales as users show preference for her former employer and Facebook Inc. She benefited last year as Yahoo's stock price doubled, reflecting the company's stake in Alibaba Group Holding Ltd. Her challenge now is translating a catalog of new products -- from updated advertising features to a food site -- into growing sales.

"It's a dismal outlook," said Colin Gillis, an analyst at BGC Partners in New York, who rates the stock a hold. "There's going to be more pressure to perform as the year progresses."

Yahoo fell as much as 6.9 percent to $35.60 in extended trading after yesterday's report. The stock rose 4.3 percent to $38.22 at the close in New York.

The company holds a stake of about 24 percent in Alibaba, the Chinese e-commerce company that is considering an initial public offering.

Alibaba Earnings

Earnings from Yahoo's equity interests, including its holdings in Alibaba and Yahoo Japan, rose to $222 million from $149 million in the fourth quarter last year. Alibaba's revenue rose 51 percent to $1.78 billion during the three months ended September. Sales growth slowed from 61 percent in the prior quarter, another reason for concern at Yahoo, said Ben Schachter, an analyst at Macquarie Securities in New York.

"It's fair to say that people were hoping those results would be a bit better," said Schachter, who has the equivalent of a hold rating on Yahoo. "What's been driving the stock has been Alibaba."

Yahoo said net income in the period increased 28 percent to $348.2 million, or 33 cents a share, from $272.3 million, or 23 cents, a year earlier, helped by a gain from the sale of patents. Net sales slipped to $1.2 billion from $1.22 billion a year ago, in line with analysts' average estimate, according to data compiled by Bloomberg.

Mayer said during a conference call yesterday that reaching a desirable level of growth will take years. To speed a recovery, Mayer said she's boosted investments in engineering, shuttered underperforming services and focused on attracting users with more engaging products. She also made a risky bet by spending $1.1 billion last year on Tumblr Inc., a blogging site with little revenue.

Limited Progress

"In 2013, we built a foundation for growth," she said. "I'm very pleased with our progress."

In her first full year on the job, Mayer presided over a 0.9 percent decline in net revenue to $4.43 billion from $4.47 billion in 2012. Ken Goldman, Yahoo's chief financial officer, said yesterday that earnings before interest, taxes, depreciation and amortization, or Ebitda, will fall "modestly" this year.

"I think they still have some time before they can really start exhibiting some positive traction," said Sameet Sinha, an analyst at B. Riley & Co. in San Francisco who has a buy rating on the stock and doesn't own it.

Management Changes

Yahoo's results follow a leadership shakeup. Mayer fired Chief Operating Officer Henrique de Castro, another former Google executive, earlier this month after tensions erupted between the two. During the conference call, Mayer said de Castro was not a "fit" for the company and added that she will not be replacing him, giving the CEO more direct access to leaders on the advertising team.

In a memo to employees announcing de Castro's departure, Mayer said some of the former COO's lieutenants will report to her, including Ned Brody, head of the Americas region; Dawn Airey, senior vice president for Europe, Middle East and Africa; and Rose Tsou, senior vice president for Asia-Pacific.

Before de Castro left, Yahoo unveiled updated advertising features, including a service to help marketers better target audiences and a new ad exchange to give clients more tools to manage promotions on their websites.

The company also is pushing out a new lineup of products to help attract more visitors like a publication that targets consumer technology users and a channel called Yahoo Food, which features photos, recipes and trends in cuisine.

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