Yahoo targets mobile after results beat expectations

23/10/2012

Yahoo is to focus its efforts on mobile advertising as the embattled web giant looks to compete with the likes of Google and Facebook. Announcing the company’s third quarter results, which beat expectations, Yahoo’s new boss Marissa Mayer revealed a revival strategy focused on making it a "predominantly mobile company."

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Mayer, who was poached from Google after 13 years with the company, insiste that the company doesn't need a "giant pivot" in direction, as it reports better-than-expected financial results. Instead, she said the company needed to focus on its mobile offerings.

Mayer said Yahoo! had underinvested in the technology and would update its websites – which include sports results, news and email - to make them more smartphone friendly.

Mayer said that she plans to ensure that Yahoo’s services become a “daily habit” for its 700 million users. Toward that end, she wants to improve Yahoo’s search engine and email service and indicated that the home page of the company’s website will get a makeover.
She also pledged to pour more resources into developing services for smartphones and tablet computers.

"Our vision is to make the world's daily habits inspiring and entertaining," she said in her first public appearance since taking the helm in July.

"Mobile represents not only a daily habit but a platform shift we have to ride in order to be relevant."

Excluding $2.8bn (£1.7bn) earned from the sale of its shares in Chinese internet giant Alibaba, Yahoo!'s income was $177m (£110.5m) in the third quarter of this year.

While its revenues rose slightly, to $1.09bn (£0.68bn) compared with $1.07bn (£0.66bn) a year ago.

Rather than invest in a different businesses strategy, Mayer said Yahoo! would improve its performance by finding opportunities in its existing businesses, including internet search.

"We're committed to going back to our roots as a consumer internet company focused on user experience," she said, adding "we intend to win".

But she said her top priority was to invest in the industry's transition to mobile devices – which even companies like Facebook and Google are struggling with.

"We do need more mobile engineers here," Mayer said. "It is clear that at some point in the future Yahoo! will have to be a predominately mobile company."

Mayer is Yahoo!'s third boss in a year, after former boss Scott Thompson resigned less than 6 months at the top over a controversy about his academic credentials.

The company makes the majority of its money from advertising online, but has fallen behind rivals like Google in recent years, and missed out on the online social networking boom.

Yahoo! still gets around 700 million users visiting it every month, but the amount of time people spend on its websites is declining.

Revenue increase

The third-quarter results announced Monday weren’t astounding, but they were better than analysts anticipated. Most importantly, Yahoo’s net revenue crept up from the previous year for the third consecutive year. That reinforced the belief that things are finally getting better at Yahoo after five years of financial malaise, especially with the hard-driving, well-respected Mayer at the helm.

Net revenue in the latest quarter rose 2 percent to $1.09 billion. That was about $10 million more than analysts had predicted.

Although modest, the revenue growth is a positive sign after years of steady declines. Net revenue also crept up slightly from the previous year in each of the previous two quarters while Yahoo was being run by other CEOs.

Yahoo shares gained 75 cents, or nearly 5 percent, to $16.52 in extended trading. If the shares hit that price in Tuesday’s regular session, it will be the highest level that the stock has reached since Mayer’s arrival.

Yahoo earned $3.2 billion, or $2.64 per share, during the three months that ended in September. Most of that profit stemmed from a one-time gain of $2.8 billion that Yahoo pocketed by selling half its stake in Alibaba Group, one of China’s most successful Internet companies. Yahoo earned $293 million, or 23 cents per share, at the same time last year.

If not for the Alibaba windfall and a restructuring charge, Yahoo said it would have earned 35 cents per share. On that basis, the company easily topped the average earnings estimate of 26 cents per share among analysts surveyed by FactSet.

The earnings included a $135 million benefit from a lower tax rate.

The Alibaba sale left Yahoo with $9.4 billion in cash at the end of September. The company already has earmarked $2.5 billion of the money to pay taxes in the fourth quarter and expects to spend another $3 billion buying back its own stock in an attempt to boost the price.

Yahoo’s revenue for the third quarter totaled $1.2 billion, a 1 percent dip from last year. That comparison is misleading, though, because last year’s revenue included money that Yahoo no longer books because of an Internet search advertising partnership that diverts some of its ad sales to Microsoft Corp.

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