Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

It would be tempting to think that Yahoo's ugly finances don't matter anymore. After all, it's a company on the cusp of being sold for scrap, right? That's what we've all been writing about for many weeks. Broken Yahoo will be Verizon's problem soon, or TPG's. Or a Yellow Pages company's.

Sorry to say, Yahoo's financial performance still matters. Because Yahoo may not be sold this time, just as it wasn't after previous bouts of will-they-or-won't-they sale processes more than four years ago. It's always hard to predict the outcome when a company hits the auction block. With Yahoo, unpredictability is simply standard operating procedure.

It's not clear if Yahoo's board will be satisfied with the existing bids, especially if directors want somewhere in the neighborhood of $10 billion for Yahoo's Web business. Even Jeff Smith, the angry investor who is a thorn in Yahoo's side, isn't sure the company will sell its Web properties. Just because the company is doing all it can to hunt for the highest bidder, Smith told CNBC, "doesn't mean they're necessarily going to follow through with the process or get a good result in that process." 

All that means is our long national Yahoo nightmare isn't over. If Yahoo isn't sold now -- or, sorry to say, if Smith succeeds in taking over Yahoo's board and maybe reboots the sale process -- the company's financial prospects remain critical. And while it's mere months into CEO Marissa Mayer's latest turnaround plan, which she has said could take years to pay off, the early report card doesn't do much to stem Yahoo's crisis of investor confidence. 

Yahoo on Tuesday declared victory because its first-quarter financial results were not catastrophic. The company, which was nicely profitable until the last 18 months or so, posted an operating loss of $167 million -- its worse operating loss in at least a decade, according to Bloomberg data . Revenue, excluding payments to direct Web traffic to Yahoo, fell "only" 18 percent compared with figures in the period a year earlier. Again, that was the worst revenue decline in years.

Purple Pain
Since Marissa Mayer took over Yahoo, the company has morphed from healthy profits to losses
Source: Bloomberg
*Note: Q4 2015 operating loss excludes an accounting charge.

The revenue growth rate for Yahoo's "Mavens" business -- a made-up acronym for supposed growth areas of mobile, video, native and social advertising -- slowed to 7 percent from 60 percent last year. Yahoo did prove exceptionally effective in cost-cutting. Yahoo ended the quarter with 9,400 people, or 2,500 fewer people than it employed a year ago. 

Given what's happened early in 2016, it's becoming more difficult to believe that Yahoo will be able to pull off its own expectations for the year. The company has said it plans to fire enough people to cut more than $400 million annually from its expenses, shore up weaknesses in assets like Tumblr and somehow set up the company to return to revenue growth next year. Oh, and the company is also trying to work through a complicated deal to separate its minority stake in China's Alibaba from the rest of the company. And deal with the potential buyers for pieces of Yahoo. 

Yahoo has done impressive work in recent months to shore up its financial health. But its combination of tasks sound impossible to do in a year, because it may in fact be impossible. 

Yahoo's financial pains add more evidence to how much Mayer missed a golden opportunity. The right time to push through a turnaround would have been a couple of years ago, when Yahoo still had cover from the rising value of its Alibaba stake.

Drunk on Alibaba's rising value, investors would have overlooked Yahoo's year of awful financials. They might have even condoned Mayer's assigning 10 percent of the staff to a new kind of smartphone search technology that she has been promising forever but seems to be imaginary. Now the Alibaba protection is going away, investors don't trust Yahoo anymore, and patience is a commodity that has run out. 

Alibaba Protection
Yahoo would have had time for a turnaround when its share price was propped up by the rising value of its investment in Alibaba. Now that protection is gone.
Source: Bloomberg

The company's credibility problem is also infecting the continuing auction of Yahoo's Web business. Smith said in the CNBC interview that Yahoo directors and executives aren't to be trusted, so he wants to keep pressure on the board to sell the Web business for the best price possible. 

"There have been cases with this management team and this board where they've said they are going to do things over the last several years and then they didn't follow through," Smith said. He cited Yahoo's failure to follow through on pledges to generate cash from its minority stake in Yahoo Japan and to sell some real estate holdings. He also said the company had promised it was through the worse stretch of financial results. 

The worst wasn't over for Yahoo. And in the midst of its impossible year, a sale for whatever price Yahoo can fetch is looking like a better and better option. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The fourth-quarter 2015 operating loss of $4.5 billion was worse, but that included a one-time accounting charge to write down the value of Yahoo's assets. 

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Shira Ovide in New York at

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Daniel Niemi at