When earnings season comes around, everyone sort of expects Google to deliver. But Yahoo? It has been a while but Yahoo managed to follow Google and delivered investors a solid third quarter yesterday. Profits surged by 244% and the company’s stock rose by 5% in after-hours trading as a result.
According to Yahoo CEO Carol Bartz, “we had a solid third quarter that signals our major businesses have stabilized“. She pointed to the new Yahoo homepage, the company’s big ad campaign and global expansion as signs that the company is on the right path.
Unfortunately, while investors rightfully love Yahoo’s big jump in profits, the numbers that matter when it comes to Yahoo’s future paint a different picture:
- The $1.58bn in revenue Yahoo generated in the quarter represents a 12% year-over-year drop. That beat analyst expectations but a 12% drop in revenue is still a 12% drop in revenue.
- $98m of the company’s profit of $188m came from the sale of its stake in Alibaba.com.
- Cost-cutting also contributed greatly to Yahoo’s profit jump. To be fair, many other companies, including Google, have managed to deliver strong profits in these tough times thanks in part to cost-cutting measures, but you can only cut so much. Google, for instance, may be leaner and meaner, but it’s hasn’t let up on the gas when it comes to trying to innovate and enter new markets. The same can’t be said for Yahoo.
- Yahoo’s “brand revitalization” campaign? Early indications are it’s not working.
Obviously, if the worst of the Great Recession is indeed behind us, as Google’s Eric Schmidt recently predicted, Yahoo will benefit as advertiser start spending again, especially on display ads. Yahoo will never hurt for an audience but right now, it appears that Bartz has done a great job managing Yahoo on a quarter-to-quarter basis with the goal of appeasing Wall Street. Meanwhile, there are no signs that the ‘stabilization‘ mentioned over and over in the company’s earnings call means anything other than ‘stagnation‘ when it comes to product development and innovation.
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