Yahoo Earnings Beat Expectations Under New CEO

Joel Anderson |

Yahoo Earnings Beat Expectations Under New CEOThe first earnings call from new Yahoo (YHOO) CEO Scott Thompson showed an uptick in revenue, reporting after market close on Tuesday. The earnings report comes amid serious questions about the company and its future. While investors clamored for more information about the new strategic plans from Scott Thompson, who left eBay (EBAY) unit PayPal to take the top spot at Yahoo, and Thompson offered up a new strategy to divide the company into three divisions.

Revenue Increases in First Quarter Under Thompson

 

Yahoo saw a year-over-year uptick in profit of 28 percent to $286 million. This meant an EPS of $0.23, beating average analyst expectations from a Reuters poll that earnings would remain steady at $0.17 per share. This came despite revenue remaining largely the same, increasing just 1 percent to $1.2 billion.

The report comes on the heels of Yahoo shedding some 2,000 jobs, or 14 percent of its workforce, earlier this month. The lay-offs represented the biggest layoff in the Sunnyvale, CA company's 18-year history. This should free up $375 million a year in savings and investors are looking forward to profit margins potentially rising as high as 50 percent.

Big Questions Remain About Future, Asian Assets

Thompson inherited a company that was falling from its past glory. Since its founding, Yahoo has allowed Google (GOOG) to leapfrog it and power into the top spot as the world's most popular search engine. A recent Pew poll of American internet users revealed that 83 percent of respondents listed Google as their favorite search engine. Yahoo, while finishing second, still managed only 6 percent of respondents. As such, Yahoo's future in the space is unclear.

Much of the speculation about Yahoo's future plans centered on what it intended to do with its Asian assets, including  a 33.41 percent stake in Yahoo Japan (4689.TYO) and a 40 percent stake in Alibaba (ALBIY). Thompson stated in his conference call that the company would be looking for a simpler avenue for to "monetize" the company's stake in Alibaba, potentially worth billions. However, the company's revenues appear to be drawn largely from equities interest, which doubled year-over-year, while the company's core businesses outside of Asia appear less certain.

"Their minority stake in their investments is generating more profit than their core business," said BGC Partners analyst Colin Gillis. "Here is the one piece that is always sad about Yahoo. Their income from operations was about $169 million and their earning and equity interest was about $172 million."

Much of last year, rumors swirled about potential deals to buy Yahoo outright, with potential buyers including Microsoft (MSFT) and a combination of Alibaba and SoftBank (SFTBF).

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CNQ:CA Canadian Natural Resources Limited 45.50 0.19 0.42 228,765
EBAY eBay Inc. 28.68 0.26 0.91 618,016
GOOG Alphabet Inc. 758.01 7.51 1.00 192,690
YHOO Yahoo! Inc. 40.11 0.04 0.10 481,411
MSFT Microsoft Corporation 59.86 0.61 1.02 2,060,548

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