San Francisco: Yahoo Inc’s uninspiring quarterly sales forecast disappointed Wall Street and underscored how the one-time Internet leader is struggling to keep up with Google Inc and Facebook.
Investors have pressured Yahoo, the leader in display advertising, and chief executive Carol Bartz to deliver growth and revive its stock price, amid talk that private equity firms are exploring a buyout of the $20 billion company.
Analysts said the dearth of growth prospects was spurring high level executives to leave Yahoo. Three top officials have resigned this month.
“We’re working to reverse years of decelerating growth,” said Bartz, who joined in 2009 and since laid off staff to slash costs. “One byproduct of any change is always movement of people. Some people leave, some get promoted and some good new people arrive.”
Bartz did not comment on the private equity talk. Yahoo shares have gained more than 6% since reports last week that a variety of private equity firms, including Silver Lake Partners, were exploring a potential buyout of the company -- possibly in partnership with the likes of AOL Inc or News Corp.
“It would make sense if they did something with AOL because the business is at the point where it’s a game of scale,” said UBS analyst Brian Pitz.
“Having the largest amount of display advertising ... and ability to take out a large amount of costs, could be pretty compelling, but it’s easier said than done. There’s a lot of politics involved and reasons why it wouldn’t happen.”
Sources have said any buyout deal would be contingent upon Yahoo selling its 40% stake in China’s Alibaba Group. This would drastically reduce Yahoo’s market value of almost $20 billion now, making a deal more feasible.
But Yahoo has indicated that it is not in any hurry to rid itself of its prized assets.
“To this day no other Internet company outside of China has done as well with their investment in country as we have,” Bartz said on Tuesday.
It projected fourth-quarter revenue, excluding traffic acquisition costs, of $1.125 billion to $1.225 billion. Analysts were looking for revenue of $1.26 billion, according to Thomson Reuters.
“The revenues were a little bit light and the guidance is also sort of uninspiring,” said Clay Moran, an analyst at the Benchmark Company.
Moran said the 17% revenue growth from online display ads on Yahoo’s owned and operated websites during the third quarter was weaker than expected.
“We feel pressure to execute on our plan, as we should. We need to deliver on our plan to deliver shareholder value. And when we do that the share price will take care of itself,” said chief financial officer Tim Morse.
“We’re doing a terrific job in some areas. In others, we’re clearly in transition, and I think it’s fair to want to see more from us in the future before people believe fully in the (growth) targets.”
Net income in the three months ended 30 September was $396.1 million, or 29 cents a share, compared with $186 million, or 13 cents a share, in the year-ago period. But Yahoo said its earnings included a 13 cent benefit from the sale of its “HotJobs” Web service. Analysts had expected earnings of 15 cents a share.
Net revenue, which excludes revenue it shares with website partners, totaled $1.12 billion in the third quarter, compared with $1.13 billion in the year-ago period and slightly below the $1.13 billion expected by analysts.
Yahoo’s shares held steady in extended trading after closing 2.7% lower at $15.49 on Nasdaq.