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Yahoo earnings, revenue fall

(MoneyWatch) Yahoo (YHOO) topped analyst forecasts in announcing earnings Tuesday after the bell, but the company's sales and profits are nothing to write home about

Yahoo (YHOO) reported third-quarter revenue of $1.13 billion, down 5 percent year over year. Revenue without so-called costs of acquiring traffic, Yahoo's normal metric, was down 1 percent to $1.09 billion, in line with Wall Street expectations. Earnings per share plummeted 89 percent to 28 cents a share, and non-GAAP earnings per share was 34 cents, beating analyst forecasts of 25 cents.

Yahoo's financial performance continues to muddle along, with revenues continuing to slide quarter after quarter, year after year.

Investors hoped the installation of former Google (GOOG) executive Marissa Mayer as CEO in July 2012 would halt the decline. But despite trying to transplant parts of Google's look and feel to Yahoo's sites, along with acquiring new technologies and products, the new Yahoo seems a lot like the old Yahoo.

Although the company's stock continues to climb (even as some savvy investors bail out), eventually investors tire of promises and want to see results, as former Yahoo CEO Carol Bartz learned the hard way.

Yahoo's revenue has been on a long decline, as the blue line in the following shows. The vagaries of who has been in the CEO's office have apparently had little to do with performance.


Even now, about 15 months after Mayer was appointed CEO, revenue continues on its gentle slide, with periodic upticks in the fourth quarter of a year as holiday advertising provides a booster shot.

The red line shows net income. Other a spike in the third quarter of 2012, owning to the sale of part of its stake in Chinese e-commerce giant Alibaba Group, net income has been relatively flat. Even that is only because continued cost cutting has offset declining revenue.

Disconnect between performance and price

Still, stock price and market capitalization have been on a steady rise since Mayer joined the company, as this graph shows (blue is stock price; red is market cap).


Mayer has recently been on the cover of Bloomberg Businessweek and in a Vogue photoshoot. Her celebrity and reputation coming out of Google (GOOG) seem to be what have driven the uptick of the stock.

Not so long ago, Carol Bartz was the center of expectations for Yahoo and ultimately nothing happened, other than her forced departure. As Mayer's supporters, like Business Insider's Henry Blodget, point out, there have been significant changes to some key products and a series of acquisitions, including the high-profile microblogging site Tumblr. Yahoo now claims to have 800 million active monthly users.

And yet, there is a significant difference between having users and making money. As GigaOM's Om Malik points out, the company struggles in mobile ratings, even as hundreds of people working in the division. There is stagnation or even significant shrinking in the number of users for some important core products such as Yahoo Messenger or Yahoo Finance.

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