Thu, Oct 21, 2010 - Page 10 News List

Yahoo’s revenue forecast disappointing to investors


Yahoo Inc’s fourth-quarter revenue forecast disappointed Wall Street, as the Web portal struggles to revitalize growth and stave off rivals such as Google Inc and Facebook.

Investors have pressured Yahoo, the leader in display advertising, and chief Executive Carol Bartz to deliver growth and revive its stock price, amid talk that private equity firms are exploring a buyout of the company.

Executives declined to comment on those reports on Tuesday.

“We feel pressure to execute on our plan, as we should. We need to deliver on our plan to deliver shareholder value. And when we do that the share price will take care of itself,” chief financial officer Tim Morse said.

“We’re doing a terrific job in some areas. In others, we’re clearly in transition, and I think it’s fair to want to see more from us in the future before people believe fully in the [growth] targets,” he said.

Yahoo projected fourth-quarter revenue, excluding traffic acquisition costs, of US$1.125 billion to US$1.225 billion. Analysts were looking for revenue of US$1.26 billion, Thomson Reuters I/B/E/S said.

“The revenues were a little bit light and the guidance is also sort of uninspiring,” said Clay Moran, an analyst at the Benchmark Co.

Moran said the 17 percent revenue growth from online display ads on Yahoo’s owned and operated Web sites during the third quarter was weaker than expected.

Net income in the three months ended Sept. 30 was US$396.1 million, or US$0.29 a share, compared with US$186 million, or US$0.13 a share, a year ago.

However, Yahoo said its earnings included a US$0.13 benefit from the sale of its “HotJobs” Web service. Analysts had expected earnings of US$0.15 a share.

Net revenue, which excludes revenue it shares with Web site partners, totaled US$1.12 billion in the third quarter, compared with US$1.13 billion a year ago and slightly below the US$1.13 billion expected by analysts.

Yahoo shares have gained more than 6 percent since reports last week that a variety of private equity firms, including Silver Lake Partners, were exploring a potential buyout of the company — possibly in partnership with the likes of AOL Inc or News Corp.

“It would make sense if they did something with AOL because the business is at the point where it’s a game of scale,” UBS analyst Brian Pitz said.

“Having the largest amount of display advertising ... and ability to take out a large amount of costs, could be pretty compelling, but its easier said then done. There’s a lot of politics involved and reasons why it wouldn’t happen,” he said.

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