Jerry Yang to make Yahoo earnings debut amid low expectations
New Yahoo CEO Jerry Yang makes his Wall Street debut Tuesday and the expectations couldn't be lower.
In some respects that's good news. If Yang can deliver anything on the earnings conference call--halfway decent results, a glimmer of hope, a few coherent answers and a proper pronunciation of Yahoo--he'll overdeliver. Why? Most Yahoo watchers are expecting little in the way of good news.
When Yang took the reins from Terry Semel the company lowered expectations. Now analysts are expecting earnings of 11 cents a share for the second quarter ending June 30. Revenue is projected to be $1.24 billion, according to Thomson Financial.
Sure Yahoo has a major Google problem and can't compete on monetization. Yes, Google is entering display advertising in a move to hurt Yahoo. And it's true that display ads are slowing too.
But we already know that. The big question is how much gloom and doom around Yahoo is already factored in. Let's peruse the previews:
- Jeffries analyst Youssef Squali: "We believe management will guide to FY07 revenue and EBITDA levels that are at the lower end of its previously stated range...The newly shuffled management team has 12-18 months to show results, including a re-acceleration in branded revenue growth, in our view, otherwise the chances of a sale increase materially."
- Cantor Fitzgerald analyst Derek Brown: "We expect 2Q:07 results to reinforce our view that Yahoo is losing considerable share in the online advertising industry, due to shifting consumer behavior, fast-moving competitors, operational gridlock, and technological slip-ups Within this framework, Panama appears to be performing reasonably well, but has not proven a 'game-changer,' while ongoing weakness in display advertising remains a meaningful challenge."
- ThinkEquity Partners analyst Stewart Berry: "Our checks with large interactive marketers indicate that Yahoo's premium display offerings remain more expensive and less compelling versus peers, particularly MSN."
Tough crowd. Meanwhile, Wall Street is referring to Yahoo as a Web 1.0 player. Translation: Yahoo is way behind on social features.
Despite all of those issues Yahoo still has a ton of assets. Squali even refers to Yahoo as a value stock, which is a little hard to believe when Yahoo has pricier price-to-earnings ratio than Google.
But the news out of Yahoo hasn't been all bad. For instance, Yahoo launched a customized ad tool that could help the display ad business. The acquisition of Right Media could pay off.
But overall Yahoo has a major perception problem--and Yang has to fix it. Here's Yang's to-do list:
- Address Yahoo's sales plan. Sales chief Wenda Millard recently split so Yahoo is facing a soft display ad market as folks with the relationships have left. Are display and performance-based ads being sold jointly?
- Outline some concrete recruiting plans. An announcement of a new CTO would be clutch here.
- Panama update. The Panama ad system is expected to be the one bright spot--unfortunately this comes as display advertising is sluggish.
- Get social. Can Yahoo sound a little Web 2.0? It wouldn't hurt the Web 1.0 chatter among analysts.
- Cut the 2007 outlook. First thing any new CEO does is toss out enough bad news to fill a dumpster. Cut sales projections dramatically. Yahoo can't afford to miss estimates anymore. Why not lower the bar enough so a 300 pound guy with bad knees can jump over it?
If Yang can sound convincing on three of those five items he may surprise a few gloomy observers.
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