Yahoo’s Profit Tops Estimates as Mayer’s Turnaround Gains Steam

Yahoo! Inc. reported third-quarter profit that topped analysts’ estimates as an influx of advertising dollars helped boost the turnaround efforts by Chief Executive Officer Marissa Mayer.

Profit, excluding some items, was 34 cents a share, Sunnyvale, California-based Yahoo said today in a statement. Analysts had projected earnings of 33 cents, according to data compiled by Bloomberg. Revenue, excluding sales passed to partner sites, was $1.08 billion, in line with estimates.

Mayer, who took the helm of the largest U.S. Web portal in July 2012, is investing in product improvements to woo more users and marketers amid competition from Google Inc. and Facebook Inc. Last month, Mayer said the company surpassed 800 million active monthly users, an increase of about 20 percent since she arrived at Yahoo from Google.

“It’s finally showing some signs of a rebound,” said Martin Pyykkonen, an analyst at Wedge Partners in Greenwood Village, Colorado. “It’s sounding better.”

Yahoo rose as much as 6.4 percent to $35.50 in extended trading after the report. The stock fell 1.8 percent at the close in New York and has surged 68 percent this year after dropping in five of the previous seven years.

Yahoo forecast sales, excluding revenue passed on to partners sites, of $1.18 billion to $1.22 billion for the fourth quarter and $4.4 billion to $4.45 billion for the year.

While third-quarter sales and profit fell from the prior year, Yahoo is benefiting from its stake of about 24 percent in Alibaba Group Holding Ltd., China’s largest e-commerce company. Alibaba is considering going public next year after investment banks valued the company at as much as $120 billion, more than three times the size of Yahoo.

Alibaba IPO

Yahoo said today that the maximum number of shares it’s required to sell in the IPO fell to 208 million from 261. 5 million.

To infuse engineering talent and innovative products into the company, Mayer has been on a buying spree, acquiring at least 19 companies. They include mobile-application makers Stamped Inc., Jybe Inc. and Summly Ltd.,the news-reading application created by teenager Nick D’Aloisio. Her biggest deal was blogging site Tumblr Inc., which Yahoo bought for $1.1 billion earlier this year.

Mayer is also adding new products and updating existing ones. Since last year the company has released new versions of Flickr, as well as its news and sports sites. Mayer said last month that the company’s focus on products is contributing to user growth.

The developments haven’t resulted in advertising market share gains. Yahoo’s share of the U.S. online ad market will probably drop to 7.7 percent this year from 8.6 percent in 2012, according to EMarketer Inc. Google’s control will climb to 41.1 percent from 40.9 percent, and Facebook’s share will jump to 7.1 percent from 5.9 percent, EMarketer predicts.

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