Yahoo reports another big loss, writes down Tumblr value

The company managed to beat Wall Street’s limited expectations for revenue in the April to June quarter. But after subtracting commissions paid to its partners, Yahoo said its revenue fell 19 per cent from a year earlier, while its loss widened to $440 million.

Following another disappointing earnings report, the Tumblr losses could prove to be the final nail in the coffin of Mayer’s time at Yahoo.

As Quartz put it this morning: “When Yahoo CEO Marissa Mayer bought Tumblr for a cool $US1 billion in 2013, she pledged ‘not to screw it up.’ (Three) years later, it’s become apparent that Yahoo has failed on that promise.”

Investors are waiting to hear about the company’s plans, after Yahoo’s board began soliciting bids from prospective buyers earlier this year.

Monday was the deadline for final offers.

Yahoo also reported Monday that it’s writing down $US482 million in charges related to the declining value of Tumblr, almost half of what the company paid in 2013.

What remains unclear is whether Yahoo will abort its long-running turnaround attempts and sell its operations in a move that would likely end the four-year reign of Mayer.

Yahoo had little to say about its intentions when it released its earnings report.

The Californian company instead stuck to a close-lipped policy that it adopted when its board began soliciting bids five months ago.
The list of prospective buyers includes two telecommunications providers, Verizon Communications and AT&T Inc., which are hoping to broaden their array of digital services. Also in the running is a group led by Quicken Loans founder Dan Gilbert with the backing of billionaire investor Warren Buffett. Several private equity firms that specialise in buying troubled companies are also believed to be in the running.

Investors have been betting a deal will get done, partly because Yahoo recently added a sale advocate, Jeffrey Smith, and three of his allies to its 11-member board. It’s the main reason that Yahoo’s stock has climbed 14 per cent so far this year, even as the company’s fortunes have faltered. Yahoo shares rose 22 cents, or half of one per cent, in after-hours trading Monday after closing at $37.95.
Analysts have estimated Yahoo will fetch between $4 billion to $8 billion for a line-up that includes its email service and popular sections devoted to news, sports and finance. Most analysts expect the offers to come in the middle of the projected range.

Yahoo’s recent financial performance is unlikely to drive the bidding upward. In the most telling sign of the company’s deterioration, Yahoo’s net revenue — after subtracting ad commissions — fell from slightly from more than $US1 billion a year ago to $US842 million in the latest quarter. That’s the steepest decline yet under Mayer.

The eroding revenue comes as advertisers have been pouring more money into digital marketing as consumers spend more time living their lives online. Most of the advertising, though, has been flowing to internet search leader Google and social networking leader Facebook Inc.

If Yahoo jettisons its struggling internet operations, it will still retain prized stakes in Yahoo Japan and Chinese e-commerce leader Alibaba Group. Yahoo’s investment in Alibaba alone is currently worth $US32 billion, before taxes.