Yahoo’s Unchanged Sales Reflect Challenge Facing New CEO Mayer

Yahoo! Inc. (YHOO) reported sales that were little changed in the second quarter, underscoring the lack of growth that Marissa Mayer will need to combat in her reign as chief executive officer, which began yesterday.

Second-quarter revenue, excluding sales passed on to partner sites, rose less than 1 percent to $1.08 billion, Sunnyvale, California-based Yahoo said in a statement yesterday. That compares with the $1.1 billion average analysts’ projection compiled by Bloomberg.

Yahoo is lagging behind Web companies, including Facebook Inc. (FB) and Mayer’s former employer Google (GOOG) Inc., in luring the advertising that makes up most of revenue. Investors are looking to 37-year-old Mayer, the fifth CEO in three years at the biggest U.S. Web portal, to do a better job winning business than predecessors who eked out profit by slicing jobs.

“This is a turnaround situation,” said Colin Gillis, an analyst at BGC Partners LP in New York. “It’s much easier to control costs than it is to grow revenue. She’s got her work cut out for her to try to accelerate the top line.”

Yahoo’s share of U.S. spending on display ads will fall to 9.1 percent this year from 11 percent in 2011, trailing Google and Facebook, according to EMarketer Inc.

Photographer: Tony Avelar/Bloomberg

Yahoo! Inc. applications on the company's headquarters in Sunnyvale. Close

Yahoo! Inc. applications on the company's headquarters in Sunnyvale.

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Photographer: Tony Avelar/Bloomberg

Yahoo! Inc. applications on the company's headquarters in Sunnyvale.

Yahoo was little changed in extended trading yesterday after the report. The shares had fallen 0.3 percent to $15.60 at the close in New York, and the stock has dropped 3.3 percent this year.

Europe Woes

Second-quarter profit, excluding some items, was 27 cents a share. That beat the 23-cent average estimate compiled by Bloomberg, a sign that job cuts are helping reduce costs. Net income attributable to the company fell to $226.6 million, or 18 cents a share, from $237 million, or 18 cents, a year earlier.

Revenue for display advertising, minus sales passed to partner sites, increased 1.5 percent to $473.4 million during the quarter. Growth was hampered by a sales decline in the region that includes Europe.

Unlike past quarters, Yahoo didn’t provide an outlook for sales and income from operations. The company decided not to provide the forecast as Mayer had only just joined the company. Mayer also didn’t participate in the conference call.

“She is very mindful of the importance of the investor community, and I’m sure that you’ll be hearing from her soon,” said Yahoo Chief Financial Officer Tim Morse, who hosted the call. “Marissa’s a high-caliber, well-respected leader.”

Mayer, a 13-year Google veteran, replaces Ross Levinsohn, who ran Yahoo on an interim basis after Scott Thompson resigned in May over inaccuracies in his resume.

Management Changes

Thompson took over in January from Morse, who became interim CEO in September. Morse followed Carol Bartz, who was fired last year. Levinsohn also wasn’t on yesterday’s call.

Yahoo’s total sales tumbled 21 percent to $4.98 billion last year as users devoted less time to the service. Visitors on average spent less than two hours and 20 minutes on Yahoo pages in May, compared with more than six hours for Facebook, according to ComScore Inc. (SCOR)

Mayer, who joined Google as its 20th employee and its first female engineer, is credited with maintaining the company’s Spartan home page for a decade and overseeing such products as Gmail, Google News, and image, book and product search. In 2010, she became vice president of local, maps and location services.

Mayer also brings technical prowess to the CEO position. She’s an engineer and patent holder who earned a bachelor’s degree in symbolic systems and a master’s degree in computer science from Stanford University.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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