Yahoo Inc’s latest earnings report leaves no doubt the Internet company is stuck in a downward spiral.
The company managed to beat Wall Street’s limited expectations for revenue in the quarter from April to last month. However, after subtracting commissions paid to its partners, Yahoo said its revenue fell 19 percent from a year earlier, while its loss widened to US$440 million.
Yahoo on Monday also reported that it was writing down US$482 million in charges related to the declining value of Tumblr, the social-blogging service that Yahoo acquired for US$1.1 billion in 2013. Combined with an earlier write-down of US$230 million, that indicates Tumblr’s value has plunged by almost two-thirds.
FIGHT OR FLIGHT?
What remains unclear is whether Yahoo will abort its long-running turnaround attempts and sell its operations in a move that would likely end the four-year reign of CEO Marissa Mayer.
Mayer on Monday had little to say about a possible sale, as she released the latest in a succession of dismal earnings reports.
She told investors the company is carefully evaluating bids, but added: “We have no announcement today.”
The Sunnyvale, California-based company began soliciting bids five months ago.
However, a decision might come soon. Monday was the deadline for final offers.
The list of prospective buyers includes two telecommunications providers: Verizon Communications Inc and AT&T Inc, which are hoping to broaden their array of digital services.
Also in the running is a group led by Quicken Loans Inc founder Dan Gilbert with the backing of billionaire investor Warren Buffett.
Several private equity firms that specialize in buying troubled companies are also believed to be in the running.
STOCK PERFORMANCE
Investors have been betting a deal will get done, partly because Yahoo recently added a sale proponent, Jeffrey Smith, and three of his allies to its 11-member board. That was the main reason that Yahoo’s stock has climbed 14 percent so far this year, even as the company’s fortunes have faltered.
Yahoo shares rose US$0.22, or 0.6 percent, in after-hours trading on Monday after closing at US$37.95.
Analysts have estimated Yahoo will fetch between US$4 billion and US$8 billion for a lineup that includes its e-mail service and popular sections devoted to news, sports and finance.
Most analysts expect the offers to come in the middle of the projected range.
Yahoo’s recent financial performance is not expected to drive the bidding upward. In the most telling sign of the company’s deterioration, Yahoo’s net revenue — after subtracting ad commissions — fell from slightly more than US$1 billion a year ago to US$842 million in the latest quarter.
That was the steepest decline yet under Mayer.
LOSSES MOUNT
Mayer has cut spending and staff at the company, which now has about 8,800 employees. However, Yahoo’s loss widened to US$440 million and amounted to US$0.46 per share, compared with a loss of US$22 million, or US$0.02 per share, a year ago.
After adjusting for one-time charges, Yahoo said it earned US$0.09 per share in the latest quarter — short of the US$0.10 that analysts surveyed by FactSet Research Systems Inc were expecting.
The eroding revenue comes as advertisers have been pouring more money into digital marketing as consumers spend more time living their lives online.
However, most of the advertising has been flowing to Internet search leader Google and social networking leader Facebook Inc.
If Yahoo jettisons its struggling Internet operations, it will still retain prized stakes in Yahoo Japan and Chinese e-commerce leader Alibaba Group Holdings Ltd (阿里巴巴). Yahoo’s investment in Alibaba alone is worth US$32 billion, before taxes.
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