Yahoo begins taking its last lap

Last Updated Jul 19, 2016 8:46 AM EDT

When Yahoo (YHOO) issued its latest earnings report after Monday's market closed, it marked what's probably its last one as an independent company. And even though the numbers were miserable yet again, most investors will probably ignore them while they await an update on the sale of the once-pioneering Internet company.

Verizon Communications (VZ), which got into the digital content business last year with its $4.4 billion acquisition of AOL, was seen as an early favorite to acquire Yahoo's core assets, including its best-known properties such as Yahoo Sports and Yahoo Finance, which attract more than 1 billion users annually. According to Gabelli & Co. analyst Brett Harriss, Verizon can afford to pay a high price for Yahoo because of the savings it could gain from merging it with AOL.

Other Yahoo bidders are said to include AT&T (T); Quicken Loans founder Dan Gilbert, who has the backing of billionaire Warren Buffett; and private equity firm TPG. It's unclear when Yahoo will announce the results of the sale. A company spokesperson couldn't immediately be reached.

"Who knows?" said Harriss. "It could be today. It could be in a week. It should be sometime soon."

Said Scott Kessler, an analyst with S&P Global Market Intelligence who rates Yahoo as a "hold": "Yahoo has been the subject of so much speculation over the years, I think that people are going to get whatever they can get out of the (earnings) conference call."

Shares of Yahoo have climbed more than 13 percent this year amid growing investor optimism about a potential buyout. The gain isn't justified by the company's earnings.

In the latest quarter, revenue excluding payments made to its partners, fell 19 percent, the sixth decline in seven periods. Overall, the company posted a loss of $439.9 million, or 46 cents a share. Adjusted earnings were 9 cents per share, lagging the 10 cents analysts had forecast, while revenue overall rose 5.2 percent to $1.31 billion, compared with $1.08 billion consensus of analysts.

Yahoo has a had a rocky history for years as it lost its leadership in the search market to Alphabet's (GOOG).

Seven permanent and interim CEOs have run Yahoo since 2007. Sales were little changed from 2011 ($4.98 billion) to 2015 ($4.97 billion) and are expected to drop to $4.5 billion at the end of this year. The company has lost money in four out of the past six quarters. Reversing these trends isn't going to be easy, no matter who Yahoo's new corporate parent turns out to be.

"If you put together a list of the last 10 CEOs that the company has had, you could probably blame them all," Harriss said. "It's just been a poorly run company."

Ineed, the company is bloated and inefficient. As Bloomberg noted, it lags its peers in the closely followed metric of sales per employee, generating $116,000, less than half the $315,948 that Alphabet earns and the $400,000 that Facebook (FB) reaps.

Earlier this year, CEO Marissa Mayer, who activist investors are seeking to oust, announced plans to slash the company's workforce by 15 percent, or about 1,600, in light of a $4.4 billion loss. That was well under the 5,000-person reduction advocated by SpringOwl Asset Management, an activist investor that has targeted Yahoo. Analysts are expecting as many as 3,000 more job cuts. That would be nearly a third of the 9,400 workers Yahoo had at the end of the first quarter. Whoever does buy Yahoo will likely be inheriting a lot fewer employees.

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.