Yahoo Disappoints With Second Quarter Earnings

Yahoo Inc. (NASDAQ:YHOO) reported quarterly earnings this week that fell short of Wall Street expectations. In the second quarter, Yahoo’s revenue was $1.31 billion, up from $1.24 billion in the same quarter a year ago. However, excluding a change in how Yahoo accounts for revenue from its search partnership with Microsoft, revenue fell 15 percent.

The company reported a net loss of $440 million, or 46 cents a share, for the quarter. In the same quarter a year ago, the company reported a loss $22 million, or 2 cents a share. Yahoo reported adjusted earnings of 9 cents per share, short of the 10 cents that analysts expected. Excluding adjustments, the company’s operating profit fell 64 percent.

Both search ads and display ads posted significant drops. According to the research firm eMarketer, Yahoo is estimated to have 1.5 percent of the world’s digital ad revenue this year, down from 2.1 percent last year. Google is expected to command 30.9 percent of the market and Facebook is expected to have 12 percent.

Yahoo acknowledged that Tumblr was now worth about one-third of the $1.1 billion that Yahoo paid for it in 2013. In the second quarter, Yahoo wrote off an additional $482 million of Tumblr’s purchase price. This was in addition to the $230 million write-off taken in the first quarter. Yahoo never found a way to effectively sell ads on Tumblr.

The latest earnings report is expected to be the company’s last financial report before it sells its core business. In a webcast with investors to discuss the results, Yahoo’s chief executive Marissa Mayer had little to say about the potential sale. No timeline for a decision on whether Yahoo’s web, email, news and other businesses will finally be sold or potential pricing for a deal were offered during the webcast. Yahoo has been searching for a buyer for those assets since February.

Final bids for Yahoo’s internet business were due on Monday. According to reports, bidders for Yahoo’s operations include Verizon Communications, AT&T, a Quicken Loans co-founder, Dan Gilbert, and several private equity firms. Yahoo’s board is expected to evaluate the offers over the next week or two.

Yahoo’s faltering results will make it difficult to get top dollar for the company. If all the offers are rejected by the board, Yahoo would probably resort to a previous plan to spin off its operating businesses into a separate company. That would leave its huge investments in Alibaba and Yahoo Japan in the old company.