clock menu more-arrow no yes mobile

Filed under:

Yahoo Misses on Earnings and Revenue as Wall Street Worries About Core Business and Alibaba Spin

CEO Marissa Mayer swings and misses.

Yahoo missed Wall Street expectations in its third quarter, reporting 15 cents a share in net income and $1.23 billion in revenue.

Analysts had expected Yahoo to report 17 cents per share of net income, with $1.26 billion in revenue, up more than 15 percent over a year ago. The company had earnings of 52 cents per share last year.

One disturbing trend: An $86 million loss from operations totaled in the quarter, in contrast to $42 million of income a year ago. If you back out certain fees that have little to do with the core business, it gets worse.

Mobile revenue, a key effort by Mayer, was up to $277 million from $207 million a year ago. But it remains dwarfed by PC revenue of $844 million.

Another interesting number: Yahoo’s traffic-acquisition costs jumped to $119 million from $3 million a year ago, largely due to its deal with Mozilla and Oracle to provide search results. (Dear everyone, it’s expensive to buy business!)

Display revenue costs were also up, said Yahoo: “TAC paid to display partners was $104 million for the third quarter of 2015 compared to $51 million in the third quarter of 2014.”

Yahoo also trimmed its guidance going forward, cutting fourth-quarter revenue to a range of $1.16 billion to $1.2 billion from expectations of $1.3 billion.

Another not very good performance from CEO Marissa Mayer, who has been trying mightily to turn around the troubled Silicon Valley Internet giant. The lackluster results come amid a significant brain drain at the company, including the departure of close Mayer lieutenants, such as development chief Jackie Reses this week.

As I noted:

The departures of a number of high-profile executives at Yahoo has accelerated in recent months, so much so that many inside the company are becoming worried about strategy and execution of key initiatives aimed at turning around its core business.

While Silicon Valley is a place where talent moves regularly among the many tech companies, one source inside Yahoo called the situation “troubling”; another worried about the ability of managers to stanch the flow of valued employees.

Sources inside the company said CEO Marissa Mayer is attempting to put a good spin on the situation, as well as trying to stop leaking to the media about the issue. At recent companywide meetings, for example, she has put up photos of purple kittens — Yahoo’s famous color — to indicate a successful period of no leaks about the company’s internal issues including staff departures.

The focus of the conference call that will take place this afternoon with Mayer and CFO Ken Goldman will be if there is any (good) news about the spinoff of Yahoo’s stake in China’s Alibaba Group.

Mayer addressed that in her statement about the results: “As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability. In addition to sharpening focus within core business growth, our top priority is the planned spinoff of Aabaco Holdings. This is an important moment for the Company, and we continue to strive to complete the spin as quickly as we can.”

The company has not gotten regulatory approval for a tax-free transaction, which has weighed heavily on the stock, down more than 35 percent since the beginning of the year. It was up 25 percent in 2014, largely due to the surge in Alibaba’s value.

Yahoo shares were down 2 percent in after-hours trading.

Also of interest will be any comments about the talent departures and prospects for turning around the core advertising business.

Yahoo also made official its deal with Google to use it for some searches, which runs through the end of 2018. Here’s the basics from the regulatory filing: “Under the Services Agreement, Yahoo has discretion to select which search queries to send to Google and is not obligated to send any minimum number of search queries. The Services Agreement is non-exclusive and expressly permits Yahoo to use any other search advertising services, including its own service, the services of Microsoft Corporation or other third parties.”

This article originally appeared on

Sign up for the newsletter Sign up for Vox Recommends

Get curated picks of the best Vox journalism to read, watch, and listen to every week, from our editors.