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Yahoo shares fall as investors wait for new strategy

Yahoo Inc shares have declined 28 percent since Chief Executive Terry Semel took over in May because investors are impatient for a new strategy at the most-used Internet search site, analysts said.

Semel, former co-chief executive of AOL Time Warner Inc's Warner Bros film studio, took over May 1 saying Yahoo will develop new services that charge users a fee and will form partnerships with advertisers to provide services such as market research and online commerce along with ads.

The same strategy was pursued by Tim Koogle, who resigned as chief executive in April. Semel said in July that he planned to "enhance" Yahoo's services without "radically" changing the company. His plans may include adding entertainment services.

"It's not clear to me that there is a new strategy," said Derek Brown, analyst at W.R. Hambrecht & Co, who doesn't own Yahoo shares. "My sense is that there's a bit of disappointment." Brown, who rates Yahoo shares "neutral," said the stock may decline further.

Semel has said he expects to form more marketing agreements like the one Yahoo announced last month with Sony Corp Yahoo agreed to provide links to the consumer-electronics maker's online shopping site, ads for movies from Sony's film studio and advice for Sony as it sets up its own Web site for users of its products, under a multiyear contract.

Such agreements are meant to boost Yahoo's advertising sales.

The company, which gets about 90 percent of its revenue from ad sales, had a US$48.5 million loss in the second quarter, as revenue declined 33 percent to US$182.2 million.

Semel acquired online music site Launch Media Inc last week for US$12 million. Yahoo plans to sell music online as one of several new services intended to reduce its dependence on advertising.

It's also offering financial services, such as online banking, and is offering services for business, such as Webcasting of company events.

Yahoo has projected that revenue from sources other than advertising will rise to about 20 percent of the total by year-end, spokeswoman Nicki Dugan said.

Those moves aren't likely to boost earnings soon enough to satisfy investors, though, said Jordan Rohan, an analyst at Wit SoundView, who rates Yahoo shares "hold." "This is a company with US$8 billion in market cap with only marginal profit," said Rohan, who doesn't own Yahoo shares. "They need to improve."

Some investors speculated that Semel plans eventually to sell Yahoo to a media company, such as the Walt Disney Co or Viacom Inc.

"He's shoring up the financials to sell it," said John Faig, an analyst at American Express Financial Advisors in Minneapolis. American Express owned 156,973 Yahoo shares as of June, according to Bloomberg analytics.

Semel has said that he doesn't plan to sell the Sunnyvale, California-based company.

Yahoo's Dugan said the firm's results are likely to improve when US economic growth resumes and advertising sales rise.

Yahoo is one of many advertising-dependent companies whose sales have fallen, she said.
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