Yahoo Fumbling Away

Yahoo’s (YHOO) performance does not seem to be improving. Add the current economic conditions to its already worrisome leadership issues and you have a stock that continues to be in a free fall. Revenues grew by 3% over the year to $1.33 billion, missing the market’s expectations of $1.37 billion. EPS of $0.04 per share also missed the Street’s expectations of $0.08, and earnings are down 64% from $0.11, the year before.

Marketing Services revenue grew by 4% to $1.10 billion for the quarter while Fees revenue remained flat. Revenues from the U.S. grew 3% over the year and international revenues grew by 4% in the period.

Yahoo revised down Q4 revenue outlook to $1.77-$1.97 billion while maintaining operating cash flow projections of $0.49-$0.57 billion. The company is expecting to maintain margins through hiring plan revision, migration to lower-cost countries, and another round of layoffs following those in February. Yahoo plans to slash 10% of its workforce, which translates to 1,500 job cuts.

Despite the poor financial results, Yahoo's usage metrics continued to improve. In recent reports by ComScore, Yahoo is now responsible for 14% of online time spent by the world, and was ranked either first, or second, in 21 audience categories polled in September. Page views grew by 17% over the year driven by double-digit growth in both the U.S. and around the world. It frustrates me tremendously to watch Yahoo wasting an asset like this because of its pathetic leadership and strategy.

Yahoo launched its new ad platform; APT, which the company claims, will result in “simplifying the online advertising process while creating a dynamic open and innovative marketplace.” Yeah, right. This is a mouthful of nothing!

Yahoo is now apparently following three strategies to make itself more relevant to a world where Google often gets the lion’s share of attention:

1. The company is opening up to third party content providers.
2. The company is leveraging its community to uncover and publish the most interesting content, and
3. The company is paying attention to users’ insights about Yahoo.

Okay!

To personalize its users’ experience, the company is now testing a homepage redesign that will let users transform the Yahoo homepage into a personalized web dashboard. The company also launched profiles.yahoo.com, a social networking site, and began testing its new content optimization knowledge engine, which uses complex algorithms to determine the most engaging content for its users.

Its search engine dreams have been put on hold as its partnering agreement with Google (GOOG) is facing legal issues being considered by the U.S. Department of Justice. I sincerely hope that the deal doesn’t go through.

Like so many other tech companies, Yahoo is worried about the economic conditions and expects slower online advertising growth until 2009. However, the company is optimistic that the consolidation of advertising budgets with fewer media companies will allow it to bring in more business.

On Monday, the stock hit a new 5-year low of $11.31, but recovered marginally to close at $11.58. Perhaps Yahoo is now regretting not having accepted Microsoft’s (MSFT) offer of $31 a share. Well, it should, anyway. What a colossal disaster this company has created this year!

Disclosure: None

Comments

[Stockhound:]

Yell me something I don't know already.

2008 Oct 29 07:27 AM

[trowland:]

Yahoo is the best site around for many uses: mail; finance (in fast, ready to use form; personal; search; ....

2008 Oct 29 11:20 AM

[mgv11:]

an observation, yahoo was obviously out of favor before and after the rejection of microsoft but investors had an opportunity to exit, some of us didn't, don't blame yahoo.

also, ADT, "mouthful of nothing", I'd have loved a real explanation of what it was, but instead we got a throw away line as well.

I use yahoo all the time, I'm in no position to judge where they should be, only where I hope they are going and honestly some of this stuff doesn't translate real well for me so my hopes may be misplaced, but I have them

2008 Oct 29 12:15 PM

[kris23:]

Ironically enough, I use Yahoo more than any other search site on the internet. I think its mainly out of habit-that I used Yahoo in highschool when it first came out and just never made the switch. But at the same time its not surprising to me that this company is doing so bad. Yahoo looks the exact same way it did when I was in highschool, it performs the same way and its mail service is mediocre compared to the likes of gmail. Its just I dont understand how they ever thought they could keep up without innovation, without partnerships, without something to set them a part. Sentiment is weak (www.predictwallstreet....) and until they can change peoples attitudes and there customers perceptions about the company, they have a lot of work ahead of them.

2008 Oct 30 01:34 PM