Yahoo earnings beat expectations, profits triple, stock soars
Yahoo Inc. turned in a very solid quarter after an extended run of poor performance, sending its stock soaring three percent in after hours trading. Yahoo's earnings report was a welcome jolt of good news for a company that has been ravaged by takeover turmoil, management mayhem and strategic sloppiness for two years. The solid earnings numbers should also provide some cover for an embarrassing story that surfaced early Tuesday about Yahoo hiring lap-dancers for an engineering event in Taiwan.
"Yahoo! delivered a solid third quarter with top-line and bottom-line beats, driven primarily by better than expected performance in display [advertising]," UBS analyst Brian Pitz said in a note to clients after the results were announced.
Yahoo's income more than tripled to $186.1 million, or 13 cents a share, up from $54.3 million, or 4 cents a share the previous year. Excluding the impact of currency changes and other charges, revenue would have fallen 7 percent.
Although Yahoo's numbers exceeded Wall Street expectations, they fell short of the 7 percent revenue gain announced last week by Google, which has left Yahoo in the search war dust. Still, Yahoo trumpeted its numbers, which should be heartening for its beleaguered shareholders.
"We had a solid third quarter that signals our major businesses have stabilized," Carol Bartz, Yahoo's chief executive, said in a press release. Due to illness, Bartz did not attend a conference call with analysts Tuesday, but Yahoo CFO Tim Morse sounded extremely upbeat during the session. The company has dealt with a great deal of adversity since last year -- at one point , it appeared the company would likely be sold to software giant Microsoft. Company founder Jerry Yang had to fall on his sword by stepping down as CEO to save the company, which led to the company striking a search ad deal with Microsoft that is currently under review by the Justice Dept. for potential antitrust violations.
"The theme in the third quarter was stabilization," Morse told analysts, touting ad quality improvements, and stronger affiliate activity. "In display advertising, we registered our second straight quarter of sequential growth" on strength in the consumer, entertainment, and finance spaces, he said.
Morse insisted that Yahoo isn't "exiting" the search business, despite outsourcing its web search to Redmond.
"We'll innovate on top of the results that are provided by Microsoft," Morse declared. "The next revolution in search is creating a better, more personally relevant search experience." Yahoo will do that "without the billions required to keep up in the search arms race," he said.
The positive earnings results drew attention away from an embarrassing episode in which the company apologized for hiring lap dancers for a engineer's event in Taiwan.
"Our hack events are designed to give developers an opportunity to learn about our APIs and technologies," said Chris Yeh, head of the Yahoo Developer Network. "As many folks have rightly pointed out, the 'Hack Girls' aspect of our Taiwan Hack Day is not reflective of that spirit or purpose. And it's certainly not the message we want to send about our values here at Yahoo!. Hack Days are about making everyone feel welcome, including women coders and technologists."