Yahoo Revenue Tops Estimates as Focus Turns to Sale Process

Yahoo Revenue Beats Estimates as Focus Turns to Sale
  • Sales of high-priority mobile, video products gained 6.8%
  • Company affirms annual forecast of $3.4 billion-$3.6 billion

Yahoo! Inc. posted first-quarter revenue that topped estimates, a step forward in Chief Executive Officer Marissa Mayer’s turnaround while the company considers offers for its main Internet operations. 

Revenue, excluding sales shared with partner websites, declined 18 percent to $859.4 million, the Sunnyvale, California-based company said Tuesday in a statement. That exceeded analysts’ average projection of $846.5 million, according to data compiled by Bloomberg.

While Mayer is trying to show progress in her effort to revive the Web portal, investors are turning their focus to a process under way that may lead to a sale. On Monday, Verizon Communications Inc., private equity-firm TPG and YP Holdings LLC were among the first round of bidders for the company’s Internet businesses, according to people familiar with the matter.

“Nobody cares about fundamentals at this point,” said Sameet Sinha, an analyst at B. Riley & Co. “Everyone is just saying sell the company -- just get it over with.”

The company reported a loss attributable to Yahoo of $99.2 million in the first quarter, compared with a profit of $21.2 million a year earlier. Profit, excluding some costs, was 8 cents a share, meeting the analysts’ average estimate of 8 cents.

“While we remain focused on the strategic alternatives process as a top priority, our employees showed their determination and commitment to Yahoo by executing on our operating plan,” Chief Financial Officer Ken Goldman said in the statement.

Revenue Forecast

Yahoo forecast sales of $810 million to $850 million for the current quarter compared with analysts’ estimates of $860 million. The company confirmed its 2016 revenue outlook of $3.4 billion to $3.6 billion. Analysts project $3.56 billion.

Headcount dropped to 9,200 as of Tuesday, a decline of 23 percent from the end of the first-quarter a year earlier, the company said.

Shares of Yahoo gained about 1 percent in extended trading. The stock declined less than 1 percent to $36.33 at the close Tuesday in New York and has climbed 9.2 percent this year.

Yahoo, the vehicle that helped millions of people discover e-mail and the Internet in the 1990s, has failed to keep up with changing consumer tastes and advertising techniques, losing audience and revenue to Facebook Inc., Twitter Inc. and Google. The company in February began a process to explore strategic options after it scrapped a long-held plan to spin off its multibillion-dollar stake in Alibaba Group Holding Ltd. because of concerns about a potentially hefty tax bill.

Proxy Fight

In addition to a potential sale, the board is grappling with a looming proxy fight. Activist Starboard Value LP said last month it’s nominating nine directors to replace all of the board’s current members, including Mayer. The activist hedge fund, which has increased its Yahoo holdings to 1.7 percent, is seeking the director sweep after first raising concerns about how the company was being managed in September 2014.

The board needs credibility, Starboard CEO Jeff Smith wrote in a letter to fellow shareholders, adding that the nominees can deliver that. It’s important for the activist to be involved to ensure a “full and fair sale process,” according to the letter.

Smith, in an interview earlier Tuesday with CNBC, said Starboard is talking to Yahoo about replacing some, rather than all directors.

“We want to settle,” Smith said. “If we can reach a mutually agreeable situation, we want to do that.”

Mayer has continued to highlight her efforts to drive a turnaround at the company that began when she arrived in 2012. The latest iteration came in February when she announced job cuts and some property closures. The efforts were meant to put more focus on key growth initiatives, including mobile and video. Those services -- a key to Yahoo’s growth plans -- rose 6.8 percent to $390 million during the quarter.

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