Yahoo Beats Estimates, but Questions on Future Persist

Company offers no comment on CEO search

The good news on Yahoo’s latest earnings report? It beat Wall Street’s expectations. The bad news? Those expectations were very, very low.

In the past quarter, Yahoo’s board fired CEO Carol Bartz and has reportedly been fielding offers from a range of private and public buyers. All while the company continues to lose advertising dollars to rivals like Google and Facebook.

But in its quarterly call Tuesday, Yahoo said it was still able to deliver above analysts’ estimates and, ultimately, it performed well enough to give its stock a slight bump. In after-hours trading, shares in Yahoo climbed 2.5 percent to $15.86.

"We're pleased that revenue, operating income, and EPS were all above consensus this quarter," said Tim Morse, Yahoo’s CFO and interim CEO. Revenue fell 5 percent year over year to $1.07 billion, and net earnings dropped 26 percent year over year to $293 million, the company said.

During the company’s second-quarter report in July, then-CEO Bartz said Yahoo’s U.S. display ad business took some hits because of a comprehensive sales reorganization.

On the call Tuesday, Morse said that, while it’s still a work in progress, the sales headcount has stabilized and the company was able to make more premium placements in the third quarter than in the second.

“On the premium side, we saw… a pretty good job on volume,” he said. “The sales force did a nice job on sell-through. Pricing was solid.”

While non-premium ad sales were a little light, he said, they’re working on improvements in both overall supply and yield.

Morse also gave Wall Street a bit of reassuring news on its search deal with Microsoft, saying that the companies agreed to extend their revenue-per-search guarantee from 2012 to 2013.

But on the bigger questions surrounding Yahoo’s future, Morse was mostly mum.

In his initial comments to analysts, he said that an update about Yahoo’s CEO search and strategic review “will not be today and it will not be on this call.”

Later, when pressed by several analysts to shed at least some kind of light on the board’s progress, Morse said, “This will take some time. The board wants to do what’s best for the company. The board’s process will be what it will be. And the timing will be what it will be.” Asked about Yahoo’s reported deal with Microsoft and AOL to sell non-premium inventory on each other’s sites, Morse said, again, “I really don’t have any comment.”

Sameet Sinha, an analyst with B. Riley & Co, said that though the company is still losing market share, “it wasn’t a disaster.”

The RPS extension agreement with Microsoft decreases uncertainty and smooths the way for a potential buyer, he said, and the company raised its fourth quarter guidance slightly above analysts’ projections.

“Expectations were really low,” he said. “Frankly, I’m really surprised that they did what they did.”


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