Yahoo Releases Q3 Earnings… Poised To Make Billions Off Alibaba IPO
Yahoo! Inc. (NASDAQ: YHOO) shares rose 56 cents to $33.94 in after-hours trading Tuesday, following Yahoo’s third-quarter earnings report that aligned nearly perfectly with analysts’ expectations. Although quarterly net revenue – at $1.08 billion – fell 1 percent from a year ago, it matched Thomson Reuters’ projections for the quarter. Earning, too – at 34 cents a share – aligned with analysts’ projections of 33 cents a share, despite falling from 39 cents a share in 2012.
The drop in revenue places additional pressure on CEO Marissa Mayers, who has led efforts for Yahoo to bounce back from near-oblivion by launching new projects. Still, Yahoo made eight acquisitions in the third quarter—including Bignoggins, Qwiki, Xobni, Admovate, Ztelic, Lexity, Rockmelt and IQ Engines—and shares have nearly doubled in the 15 months since Mayer stepped to the helm.
I’m very pleased with our execution, especially as we’ve continued to invest in and strengthen our core business,” Mayer said in a release. “In Q3, we launched new user experiences across many of our digital daily habits – Yahoo Screen, My Yahoo, Fantasy Sports, and more. Now with more than 800 million monthly users on Yahoo – up 20 percent over the past 15 months – we’re achieving meaningful increases in user engagement and traffic.”
Although the total of paid clicks on Yahoo increased 21 percent from the same period last year, ads’ price-per-click decreased 4 percent in the same period. Furthermore, the total of ads sold increased about 1 percent compared to the third quarter of 2012, while the price-per-ad decreased 7 percent. Mayer is taking these changes as motivation to further monetize mobile advertising, as traditional display ads pay less when viewed on mobile devices. Yahoo is testing new forms of advertising that could actually be priced higher on mobile than desktop. The company is moving in the right direction: according to Mayer, Yahoo now has more than 390 million mobile users—up 15 percent from the previous quarter.
Yahoo also reported additional information on its partnership with the Alibaba Group, the Chinese Internet giant that reported $707 million profit during the three months leading up to June 30—a 159-percent increase from the same period in 2012. Yahoo holds a 24 percent stake in Alibaba, down from 40 percent when the companies joined forces in 2005—when the Chinese partner was valued at less than $3 billion. Last year, when the companies reached an agreement that Yahoo would sell $261.5 million shares in an Alibaba IPO, the Chinese e-commerce giant was valued at $35 billion. According to Yahoo’s earnings report, the total shares Yahoo must sell has been reduced to 208 million; good news since the Alibaba Group is expected to be worth more than $75 billion by the time it goes public, possibly early next year.
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