Yahoo beat Wall Street's estimates by a penny for the second quarter but sales fell short of what analysts had projected, sending shares of the company down in after-hours trading. (Statement)
For the quarter, the company said net income was $213.3 million, or 15 cents per share, on sales of $1.13 billion, after traffic acquisition costs (TAC). Analysts had been expecting earnings of 14 cents on revenue of $1.16 billion. In a statement, CEO Carol Bartz said:
We’re pleased that we continued to deliver strong operating income and margin expansion. Our search fundamentals are improving and we posted another quarter of healthy display advertising growth.
Particularly, the company said that display advertising on Yahoo's owned-and-operated sites "continued to perform well, growing 19 percent from the year-ago quarter.
In terms of the Microsoft search deal, Yahoo's earnings also reflect $86 million in search operating cost reimbursements and $18 million in transition cost reimbursements from Microsoft, which will continue until Yahoo fully transitions to Microsoft's platform. Yahoo said it views the search operating cost reimbursements "as an indicator of the long-term cost savings associated with full implementation of the Search Agreement."
Looking ahead, the company said it expects sales of $1.57 billion to $1.65 billion for the third quarter.
In a call with analysts today, Bartz said there was a "pullback" in late June among major advertisers but that things seem back to normal in July, impacting the quarter. Likewise, she said search advertising gained share but that the monetization of it fell short. In her opening statements on the call, she spent little time reflecting on the last quarter but instead talked about some of the key initiatives in place to grow engagement time on the site by users.
Specifically, she spoke of social engagement tools and partnerships with social media sites to better integrate sharing of content and information between Yahoo and social sites. She also talked about the push for richer content - going beyond words on a screen and including interactive video and, of course, social interaction with the content, That also includes mixing the two in niche areas, including football, fashion and local news. Likewise, she also highlighted in engagement tools targeted at mobile - most recently Mail and Messenger apps for Android devices and HTML5 "apps" for iPhone.
Shares of Yahoo were up slightly in regular trading, closing at $15.20. Shares began falling during after-hours trading when the earnings report was released.