INDIAN, JULY 19, 2016 – Yahoo Inc’s (YHOO.O) quarterly earnings fell short of Wall Street expectations on Monday in what may be the company’s last financial report before it sells its core business.The United Kingdom-Headquartered News Agency, Reuters, says that Yahoo reported adjusted earnings of 9 cents per share, short of the 10 cents that analysts expected.
Reuters reports further that Yahoo also announced a $482 million write-down on the value of Tumblr, the social media service that it acquired in 2013 for $1.1 billion.
It said Yahoo was in the process of auctioning off its search and advertising business, and is expected to choose a winner this week.
According to the news agency, the company said its board has made “great progress on strategic alternatives” but did not comment further on the auction process.
It disclosed that Verizon Communications Inc and AT&T Inc are said to be in the running to acquire the core business.
Reuters said a private equity firm TPG Capital and a consortium led by Quicken Loans founder Dan Gilbert and backed by billionaire Warren Buffett, is also in the running.
It noted that Yahoo also owned large stakes in Chinese ecommerce giant Alibaba and Yahoo Japan, which are worth far more than the company’s internet business.
The British News Agency said that Monday’s earnings report showed the continued slide in Yahoo’s business during the protracted sale process.
It said that after the Tumblr write-down, the company posted a net loss of $439.9 million, or 46 cents per share, compared with a loss of $21.6 million or 2 cents per share, a year earlier.
Reuters explained that although total revenue rose to $1.31 billion from $1.24 billion a year earlier, the seeming improvement was the result of a change in the way the cost of acquiring traffic was counted.
After deducting fees paid to partner websites for traffic, Reuters added, revenue fell to $841.2 million from $1.04 billion.
It quotes Ross Gerber, cofounder and CEO of Gerber Kawasaki Wealth and Investment Management, as saying that potential buyers were likely bidding lower than Yahoo believes it is worth because they estimate that Tumblr is worth “nothing” at this point.
“I cannot imagine why the sale process is taking so long, the only thing I can think of is it is being overpriced. This report does not further create an impression that paying up for these assets has any value,’’ the news agency reports that Gerber said.
It said that revenue in the company’s emerging businesses, which Chief Executive Officer Marissa Mayer calls Mavens – mobile, video, native and social advertising – showed some life.
Reuters stressed that Mavens rose 25.7 per cent to $504 million in the second quarter ended June 30.
It added that, however, B. Riley & Co analyst Sameet Sinha said the improvement in Mavens was offset by decreases in gross search revenue that is only expected to get worse.
The news agency said that Sinha reported further that gross search revenue for the quarter was $765 million, down 17 per cent from the same period last year.
“This is supposed to be the growth engine of the company, and at best, it was up slightly year over year.
“That shows that even in high-growth categories like mobile and native they’re losing their search impact,’’ it said Sinha stressed.
It also reported that JMP Securities analyst Ronald Josey said search revenues are a significant portion of Yahoo’s overall revenues and their continued decline could definitely be a factor in the sale negotiations.
“If search continues to decline as much as it has, that’s something that’s going to be called into question,’’ it quotes Josey as saying.
Reuters said that in a conference call, Yahoo Chief Financial Officer Ken Goldman touted the company’s cost-cutting efforts.
“Through excellent expenditure management of cost and capital, we achieved above the high-end of our guidance on adjusted EBITDA and significantly increased cash flow,” Goldman said.
He was referring to earnings before interest, taxes, depreciation and amortization.
The British wire service reports that Yahoo’s shares were little changed at $37.92 in trading after the bell.
