Yahoo reported an uptick in revenue that marked its first
quarterly sales growth in three years, as new Chief Executive
Scott Thompson outlined his plan to revamp the struggling Web
Citing moves to shut down dozens of underperforming online
properties, while making online commerce and mobile products
a bigger part of Yahoo's business, Thompson described "the
first steps" to regain market share from online rivals and
revive the company's growth.
"I'm convinced that we don't need to reinvent who we are,"
Thompson said during a conference call with analysts on
Tuesday (local time). "But I'm equally convinced we
absolutely do need to reinvent the experiences our users have
with the marquee properties that bring them to Yahoo every
Thompson also said that Yahoo was once more exploring ways to
"monetize" some of its stake in China's Alibaba Group.
The comments marked the most extensive details Thompson has
provided about his strategy since taking the top job at Yahoo
But the former PayPal president faces a high wall of
skepticism from investors who have watched several failed
attempts to restructure and revitalize the one-time Web
pioneer in recent years. Carol Bartz, Thompson's immediate
predecessor, was fired over the phone in September.
"I didn't hear anything particularly aggressive or
transformative in what he said," said Macquarie Research
analyst Ben Schachter.
"While Scott has a great track record, the company itself has
done many of these things," in the past, Schachter said.
Yahoo said its net income grew 28 percent in the three months
ended March 31 to $286 million, or 23 cents a share,
outpacing Wall Street expectations of 17 cents a share.
Much of the increase in quarterly profit came from Yahoo's
earnings in equity interests, which more than doubled
year-on-year and comprise mainly its investments in Alibaba
as well as Yahoo Japan.
"Their minority stake in their investments is generating more
profit than their core business," said BGC Partners analyst
Yahoo's plans for its Asian assets are being closely watched
by investors, many of whom have argued that Yahoo should sell
all or part of its holdings in the companies.
Thompson told analysts that Yahoo was exploring a simpler
deal to try and "monetise" its 40 percent slice of China's
Alibaba, a stake valued at billions of dollars and that Yahoo
once discussed unloading in a complex tax-efficient
Thompson did not elaborate, but his comments suggest the
company - which broke off deal talks with Alibaba and
Softbank last year - was willing to go back to the
negotiating table. He said that returning cash to
shareholders, in the event of such a deal, would be at the
"top of the list" of priorities.
Thomson also noted that plans to monetise its stake in Yahoo
Japan, underway for more than a year, have been beset by a
"valuation gap" which the parties have failed to "bridge." As
a result, Thompson said, Yahoo was now focused on talks with
Yahoo's partnership with Microsoft is also a work in
progress. The 10-year search deal that the two companies
entered into in 2009 has not performed up to expectations.
Thompson said he was personally working with Microsoft to
improve the payoff from the companies' 10-year search
partnership, which has not lived up to expectations.
Even so, Yahoo said that better-than-expected performance for
its search ads helped the company increase its quarterly net
revenue year-on-year for the first time since the third
quarter of 2008.
Yahoo's core display advertising business declined 4 percent
during the first quarter.
The company's net revenue, which excludes payments to
partners, totaled $US1.077 billion in the first quarter,
compared to $US1.064 billion in the year-ago period. Analysts
polled by Thomson Reuters were looking for net revenue of
It forecast net revenue in the second quarter of between
$US1.03 billion and $US1.14 billion.
Once one of the Web industry's pioneering companies, Yahoo
has seen its growth stunted in recent years amid competition
from Google Inc and Facebook.
Thompson, the former president of PayPal who took the reins
in January, announced plans this month to lay off 14 percent
of Yahoo's staff and reorganise the management structure.
Thompson said Yahoo is shutting down or "transitioning"
roughly 50 properties that do not contribute meaningfully to
user engagement or revenue.
As part of the reorganization, Thomson created a new
"commerce" group which will initially consist of existing
Yahoo online properties such as real estate and auto
But analysts said Thompson was short on details on the
commerce group, as well as on plans to bolster Yahoo's
efforts in mobile.
Mobile is viewed as a critical area for Web companies, as
consumers increasingly access the Internet from wireless
devices such as smartphones and tablet PCs. Earlier this
month, Facebook announced a $US1 billion deal to acquire
Instagram, a mobile photo-sharing apps.
"If you have a company out there that's paying a billion
dollars for a mobile app and you have Google going after
Android and Motorola...what's Yahoo's whole play on this?"
said Susquehanna Financial Group analyst Herman Le u ng.
"It's still a wait and see story," Leung said of Yahoo .