Earnings and Revenue Down — Yahoo Delivers on Expected Lackluster Third Quarter

Yahoo met weak financial expectations, turning in what can only be described as lackluster performance in its third-quarter earnings report today.

The Silicon Valley Internet giant said it earned 34 cents, a 13 percent decline, on revenue of $1.08 billion, a one percent decline from the same period a year ago.

Analysts had been estimating that the Sunnyvale, Calif.-based company would report a net income of 33 cents a share, so it’s slightly better on profit estimates — not that it matters, since all these numbers are hand-delivered to Wall Street by companies. In real terms, it is hardly anything to crow about, given how strongly the sector is growing overall and in double-digits, especially at Yahoo rivals like Facebook, Google and Twitter.

Still, Yahoo CEO Marissa Mayer gamely tried to, pushing user growth numbers when financial ones did not measure up. “I’m very pleased with our execution, especially as we’ve continued to invest in and strengthen our core business,” she said. “Now with more than 800 million monthly users on Yahoo — up 20 percent over the past 15 months — we’re achieving meaningful increases in user engagement and traffic.”

It was hard to argue with other poor numbers on the board for premium display advertising, though, where Yahoo has struggled over recent years:

• Display advertising revenue was down seven percent.
• The number of ads sold increased only one percent.
• Price per ad declined seven percent.

Search advertising showed some encouraging gains, especially after last quarter’s declines:

• Search revenue, minus traffic acquisition costs, was up three percent, although GAAP revenue was down eight percent.
• Paid clicks rose 21 percent.
• But price-per-click dropped four percent.

Another ray of sunshine: Yahoo said it had nearly $3.2 billion of cash and securities on hand, money with which it has been buying up shares.

And, on the big plus side, there was more good news from its stake in China’s Alibaba Group, which is largely responsible for Yahoo’s recent stock surge. Yahoo said today that it now does not have to sell as much of its 23 percent stake in Alibaba’s upcoming IPO as had been required in a previous agreement. It now has to unload only 39.7 percent of its assets — 208 million shares — instead of nearly half (261.5 million). That means, it can ride the gains expected in the much anticipated public offering.

No surprise, then, that Yahoo touted Alibaba’s recent quarterly performance in its results, which was a 145 percent rise in net income and a 61 percent rise in revenue. This is, especially by comparison to Yahoo, what a blowout actually looks like.

Naturally, Yahoo shares rose on the Alibaba news, up close to one percent in after-hours trading, after dropping close to two percent today to close at $33.38.

At 2 pm PT, Mayer will be presenting the earnings in the second episode of her nascent show, a live-stream video presentation of results, in which she will take questions from Wall Street analysts and also — a first — from the general audience.

As I noted earlier today:

Look for Mayer to continue to claim that the company is still in turnaround — part of the people, then products and then profits map she has laid out. It’s essentially a down-is-the-way-up strategic vision, promising eventual payoffs from all the investments in talent, acquisitions and morale-boosting. And let’s not forget Logopalooza!

Mayer will also likely tout mobile growth, which she has recently said is about 350 million monthly users out of 800 million active uniques overall. She will clearly push the line that Yahoo is growing users, even if it can’t grow revenue and profits.