Yahoo Profit Plunges On Weak Ad Business, Charges

(RTTNews) - Yahoo! Inc (YHOO) on Tuesday reported a plunge in first-quarter profit, hurt by lower prices for display ads as well as stock-based compensation expense and restructuring charges. Both quarterly earnings and revenues fell short of Wall Street estimates, denoting the challenges CEO Marissa Mayer faces in implementing her turnaround plans at Yahoo.

Mayer said Yahoo is amid a multi-year transformation to greatness. "For the next phase of the transformation, we will focus on accelerating our GAAP revenue growth while managing our margins and costs."

Under Mayer, Yahoo has boosted its content and laid more focus on its mobile business, even as it struggles to lift its display ad business.

Yahoo said that during the quarter, display revenue, excluding traffic acquisition costs, or TAC, dropped 7 percent from a year ago. Price-per-ad slid 17 percent even as number of ads sold increased about 29 percent.

The company's search revenue, excluding TAC, fell 3 percent. Yahoo said its search volume gained from a partnership with Mozilla. The number of paid clicks grew about 21 percent and price-per-click increased about 3 percent, it said.

Yahoo's smaller business of mobile revenue jumped 61 percent from a year ago, and represented 21 percent of revenues.

The company also saw momentum in Mavens revenue - including video ads and packages, and Tumblr ads and fees - with this segment accounting for 33 percent of total revenues.

Overall, Yahoo posted first-quarter net earnings of $21.2 million or $0.02 per share compared with $311.6 million or $0.29 per share last year.

Results for the quarter included, among other items, restructuring charges of $51.2 million and stock-based compensation expense of $115.7 million.

Excluding items, adjusted earnings for the quarter were $0.15 per share compared with $0.38 per share a year ago.

On average, 32 analysts polled by Thomson Reuters estimated earnings of $0.18 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter rose to $1.23 billion from $1.13 billion last year.

Excluding traffic acquisition costs, or payments made to affiliates, revenues declined to $1.04 billion from $1.09 billion a year ago. Thirty-three analysts had a consensus revenue estimate of $1.06 billion.

The earnings come after Yahoo recently amended its search deal with Microsoft (MSFT) related to increasing flexibility for their ad teams and also about presenting the search results. Meanwhile, a filing today shows that from October, Yahoo and Microsoft can terminate the agreement with a notice period of about four months.

Later this year, Yahoo will spin-off its stake in Chinese e-commerce giant Alibaba (BABA), and investors' gaze would be more focused on its core business.

Yahoo closed Tuesday at $44.49, down $0.16 or 0.37%, on a volume of 13.7 million shares on the Nasdaq. In after hours, the stock dropped $0.51 or 1.15% at $43.98. In the past year, the stock has trended in the range of $32.93 - $52.62.