CANBERRA: Yahoo’s revenue is still evaporating three years into chief executive Marissa Mayer’s turnaround attempt, magnifying worries that the internet company will be stuck in a financial sinkhole after spinning off its lucrative stake in China’s Alibaba Group.
A third-quarter report released earlier this week showed that Yahoo had taken another step backward as its revenue slipped 8.0 per cent from the same time last year to $US1 billion ($A1.39 billion).
The figure reflects how much revenue that Yahoo keeps after paying its advertising partners – a bill that has been climbing since the company struck a deal in late 2014 to serve as the built-in search engine in the US on the Firefox browser. It marked the ninth time in the past 11 quarters that Yahoo’s net revenue has declined or remained unchanged from the previous year.
Meanwhile, revenue at Yahoo rivals Google, Facebook and Twitter has been steadily surging as advertisers spend more of their marketing budgets on the internet. Analysts are projecting third-quarter revenue increases ranging from 14 to 55 per cent at Google, Facebook and Twitter when those companies report their results over the next two weeks.
Yahoo’s earnings also plunged 99 per cent to $US76 million, or US8 cents per share, during the three months ended in September. The steep decline reflected the huge windfall that Yahoo pocketed from selling some of its stock in the Chinese company’s initial public offering. If not for expenses covering employee stock options and other options, Yahoo said it would have earnt US15 cents per share to match the estimates of analysts surveyed by Zacks Investment Research. Yahoo’s stock dipped US38 cents to $32.45 in extended trading after the numbers came out.
Investors are now focused on the fate of Yahoo’s plan to place its remaining Alibaba holdings – 384 million shares currently worth about $US28 billion – into a new company called Aabaco Holdings.
Yahoo is doing the spin-off as part of a plan to prevent the remaining profits from its $US1 billion investment in Alibaba from being taxed in the US, but it’s now unclear whether that will pan out. The Internal Revenue Service raised doubts by declining to declare the spin-off will protect the Alibaba stake from being taxed.
Despite that setback, Yahoo Inc is still planning to complete the spin-off by 2016 with the expectation that it will qualify as a tax-free manoeuvre.
“Our top priority is the planned spinoff of Aabaco Holdings,” Mayer said. “This is an important moment for the company, and we continue to strive to complete the spin as quickly as we can.”
