Yahoo’s latest earnings report leaves no doubt the internet company is stuck in a downward spiral. The company managed to beat Wall Street’s limited expectations for revenue in the April-June quarter. But after subtracting commissions paid to its partners, Yahoo said its revenue fell 19 per cent from a year earlier, while its loss widened to $440 million.
Investors are waiting to hear about the company’s plans, after Yahoo’s board began soliciting bids from prospective buyers earlier this year. Monday was the deadline for final offers.
Yahoo also reported Monday that it is writing down $482 million in charges related to the declining value of Tumblr, the social media site that Yahoo acquired for $1.1 billion in 2013.
What remains unclear is whether Yahoo will abort its long-running turnaround attempts and sell its operations in a move that would likely end the four-year reign of CEO Marissa Mayer.
Yahoo had little to say about its intentions Monday when it released the latest in a long line of dismal earnings reports.
The Sunnyvale, California, company instead stuck to a close-lipped policy that it adopted when its board began soliciting bids five months ago. A decision may come soon, though.
The list of prospective buyers includes two telecommunications providers, Verizon Communications and AT&T Inc., which are hoping to broaden their array of digital services.
Also in the running is a group led by Quicken Loans founder Dan Gilbert with the backing of billionaire investor Warren Buffett.
Several private equity firms that specialize in buying troubled companies are also believed to be in the running.
Investors have been betting a deal will get done, partly because Yahoo recently added a sale proponent, Jeffrey Smith, and three of his allies to its 11-member board.
It’s the main reason that Yahoo’s stock has climbed 14 per cent so far this year, even as the company’s fortunes have faltered. Yahoo shares rose 22 cents, or half of one percent, in after-hours trading Monday after closing at $37.95.
Analysts have estimated Yahoo will fetch $4 billion to $8 billion for a lineup that includes its email service and popular sections devoted to news, sports and finance. Most analysts expect the offers to come in the middle of the projected range.
Yahoo’s recent financial performance is unlikely to drive the bidding upward.
In the most telling sign of the company’s deterioration, Yahoo’s net revenue – after subtracting ad commissions – fell from slightly from more than $1 billion a year ago to $842 million in the latest quarter. That’s the steepest decline yet under Mayer.
The company’s loss of $440 million amounted to 46 cents a share, compared with a loss of $22 million, or 2 cents a share, a year ago.
After adjusting for one-time charges, Yahoo said it earned 9 cents a share in the latest quarter – short of the 10 cents that analysts surveyed by FactSet were expecting.
The eroding revenue comes as advertisers have been pouring more money into digital marketing as consumers spend more time living their lives online.
Most of the advertising, though, has been flowing to internet search leader Google and social networking leader Facebook Inc.
If Yahoo jettisons its struggling internet operations, it will still retain prized stakes in Yahoo Japan and Chinese e-commerce leader Alibaba Group. Yahoo’s investment in Alibaba alone is currently worth $32 billion, before taxes.
