Yahoo’s Mayer Signals Growth Period After Modest Earnings

Yahoo CEO Marissa Mayer has been in charge of the Web services company for nearly two years now, and can report that it is growing again, albeit modestly.

Indeed, she believes the company is moving from decline to a modest growth period.

Modest Results

The Sunnyvale, California-based company reported 15 April that its revenue increased 1 percent to $1.3 billion (£777m) in Q1 2014 after four straight quarters with lower or flat results. While overall revenue was down 1 percent from a year ago, revenue from display ads increased 2 percent year-over-year to $409 million (£244m).

The report marked the first increase in Yahoo’s first-quarter display ad revenue in three years. Yahoo’s ad business began slipping about six years ago with the advent of social networks such as Facebook, Pinterest, LinkedIn, Instagram, and Twitter.

After all its bills were paid, Yahoo banked $312 million (£186m), or 29 cents (£0.17) per share, during the quarter. That compares to $390 million (£233m) or 35 cents (£0.20) per share in the same 2013 financial period.

“We believe we are moving from our core business being in decline to modest or stable growth,” Mayer said in a video conference call.

Yahoo’s ace-in-the-hole has been its foreign investment portfolio, which includes as its crown jewels the highly profitable Chinese-owned Alibaba Group auction/retail site system and Yahoo Japan.

Yahoo owns 24 percent of Alibaba and is anxiously awaiting the company’s initial public offering, expected to take place later this year. Alibaba’s fourth-quarter earnings more than doubled from the previous year to $1.4 billion (£837m) while its revenue ballooned 66 percent to $3.06 billion (£1.8bn).

Alibaba’s earnings were from Q4 2013 due to a three-month lag before Yahoo can book its portion of Alibaba’s profits, so investors and analysts on a video conference call 15 April got a sneak peak at future Yahoo income.

Alibaba Boon

Alibaba’s market value could range anywhere from $150 billion (£90bn) and $200 billion (£119bn) by the time it goes public, analysts say. That would provide Yahoo a substantial block of cash when it chooses to sell its Alibaba stock.

Although Mayer is generally seen as doing a creditable job as CEO – which has included repositioning the company in several sectors and overseeing the layoffs of several thousand employees since 2012 – the expected gains from the Alibaba investment is largely the reason Yahoo’s stock has more than doubled since Yahoo hired Mayer from Google in July 2012 to revive its ad sales.

Yahoo’s stock gained $2.29 (£1.37), or nearly 7 percent, to $36.50 (£21.82) in after-hours trading.

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Originally published on eWeek.