Revenues from searches, which is a key factor, to its core business have slid by 17%. Potential bidders are likely to bid lower than Yahoo’s actual worth.
In a significant development for Yahoo Inc., its latest quarterly results have fallen short of analyst’s expectations, in what is likely to be the company’s last financial report before it divests its core business.
Yahoo has reported an adjusted earnings of 9 cents per share against an analyst’s expectation of 10 cents a share. It has also announced the $482 million write-off of Tumbler, the social media service it acquired in 2013 for $1.1 billion.
Currently, Yahoo is in the process of auctioning off its advertising and search business and is expected to choose a winner by this weekend. Without commenting on its auctioning process, Yahoo has said that its board has made “great progress on strategic alternatives” without disclosing any further details.
Among the companies in the fray who are set to be running for Yahoo’s core business assets are AT&T, Verizon Communications Inc., TPG Capital, and a private equity firm along with a consortium led by Dan Gilbert, founder of Quicken, which is backed by Warren Buffett.
Incidentally, Yahoo also has a large stake in Alibaba and in Yahoo Japan, which are worth more than its core internet business.
Its latest quarterly loss of $439.9 million can be attributed to its writing down of Tumblr. In the previous year, for the same quarter, it had reported a loss of $21.6 million.
Despite presenting a loss, its total revenues have however risen to $1.31 billion from $1.24 billion, a year earlier. This rise can be attributed to a change of method that calculates the cost of traffic.
According to Ross Gerber, CEO and co-founder of Gerber Kawasaki Wealth and Investment Management, if one were to estimate that Tumblr is worth “nothing” at this point, potential buyers are likely to bid lower than Yahoo’s true worth.
“I can’t imagine why the sale process is taking so long, the only thing I can think of is it’s being overpriced. This report doesn’t further create an impression that paying up for these assets has any value,” said Gerber.
Revenues from Yahoo’s emerging business, which Marissa Mayer, Yahoo’s CEO, calls Mavens – mobile, video, native and social advertising – have risen by 25.7% to $504 million.
The rise of revenues from Mavens have however been offset by the decrease in gross search revenues, which is expected to get worse, according to Sameet Sinha, an analyst from B. Riley & Co. Gross search revenues for this quarter were down by 17% to $765 million.
“This is supposed to be the growth engine of the company, and at best it was up slightly year over year. That shows that even in high-growth categories like mobile and native they’re losing their search impact,” said Sinha.
As per Ronald Josey, an analyst from JMP Securities, revenues from searchers contribute significantly to its overall revenues and their continued decline could be determining factor during the negotiation process.
“If search continues to decline as much as it has, that’s something that’s going to be called into question,” said Josey.
At the time of closing, Yahoo’s share prices saw little change and stood at $37.92.
Categories: Entrepreneurship, HR & Organization, Strategy
manageria.biz 
Leave a comment