Yahoo! Inc. Earnings Dive Not as Bad as Expected
As much as a 42% drop was reported in the earnings for the first quarter when compared to the same period last year. Profit stood at a mere $80.07 mn. It was a loss of $0.1 per share, which upon adjusting worked out to an EPS of $0.08. The same period last year saw the profit total at $137.99 mn, which had led to an EPS of $0.15. That was a profit of $0.02 per share. In other words, the Y-o-Y decline in EPS was even worse at -46.7%.
However, what seems to have fueled the stock’s surge on Wednesday is that analysts were expecting an EPS of just $0.07. This was based on a Thomson Reuters poll. While the difference is just $0.01 in absolute terms, the surprise factor is considerable. In terms of quarterly revenue, Q1 2016 brought in $1.09 bn compared to $1.23 bn in Q1 2015. This was a -11.4% drop Y-o-Y. Analysts were expecting this to be $1.08 bn.
While the figures seemed to have impressed retail investors, they won’t give the firm the leverage to charge more for selling its assets. After all, performance has been going down. While the core business of display ads saw revenue dropping by nearly 1% to $463 mn, that from search ads dived by nearly 10% to $491.9 mn.
What is the Firm’s Top Priority Now?
Not willing to be too specific, the CEO Marissa Mayer said that the ‘strategic process’ is their top priority. Those who were interested in buying the core business assets were served a stark reminder of what they will need to deal with after buying. Unfortunately, details given were pretty vague. Even though many preliminary bids were received on Monday, the firm didn’t say anything new about that process. Mayer simply said that the firm has ‘made substantial progress towards potential strategic alternatives’ during Q1 2016. Neither were any of the bidders named, nor were any details revealed about the auction process itself.
One would wonder why they need to act so tight-lipped. After all, their next annual meeting of shareholders is expected to take place just about 2 months from now on June 23, 2016 at 11:00 AM EDT. For a business the size of Yahoo, that can be a pretty short time span, no matter how badly their business may be doing. They would be under pressure to give some visibility into the progress being made for selling the core business. And they need to do it quickly, because during the meeting in question, investors will most probably cast their vote on Starboard Value LP’s call to replace the current board in its entirety with a new group of 9 directors.
Verizon Communications Inc. was one of the bidders who had made it in time for the deadline. There were also private-equity firms such as Silver Lake, Bain Capital, Advent International and TPG among the list of interested bidders. Yahoo has tried many ways of keeping costs low, including layoffs and shutting down products, which include seven digital publications. It is still falling behind Google and Facebook. As per eMarketer Inc.’s estimates, Yahoo will get only about 1.5% of the global online ads market this year. Last year it was 2.4%.