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Yahoo! A Profit. Boo! Not from Operations.

October 23, 2012

Yesterday afternoon, Yahoo! held an earnings call announcing third quarter results.

Today’s chart provides a snapshot of the current state of Yahoo’s business.

The results modestly beat analyst expectations, but gave little insight about where the company is heading.

Revenue appears to have stabilized but shows no signs of growth either. Net income was extra-ordinarily high last quarter due to Yahoo’s sale of half its stake in Chinese Internet company Alibaba. Operating income declined 14 percent year-over-year though, giving a better idea of the state of Yahoo’s business. There are only a few non-core assets to sell. At some point investors will want to see an increase in results, market share or both. If their patience wears too thin, a new CEO search committee will be put together or an investment bank will need to be hired to find an M&A partner. 

CEO Marissa Mayer announced that her company will increasingly focus on search and mobile in the future and sees Yahoo! in a good starting position for the shift to mobile platforms (Perhaps Mr. Zuckerburg and Co. should partner with her). Yahoo is in the unenviable spot of potentially slipping into the “ditch”. That ditch is where the names who are too little to be an effective mass market player, and too big to be a profitable niche player, eventually end up in the absence of an M&A deal. See Sheth Model Rule of Three for more on this framework. 





From → business, Strategy

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