Yahoo! Misses Its Growth-Stock Glow

Sorry, Yahoo! (Nasdaq: YHOO  ) . You're still a poor man's Google (Nasdaq: GOOG  ) .

Yahoo! did finish ahead of Wall Street's bottom-line expectations in its quarterly report last night. Dig a little deeper, though, and you'll soon realize that the fading dot-com star hasn't done enough to reverse course.

For example, a revamped online presence can work wonders for a company, as Microsoft (Nasdaq: MSFT  ) discovered back in the springtime, when it repositioned itself with Bing. Yahoo! gave its homepage a fresh look yesterday, but the window dressing wasn't enough to make a difference.

Let's start with the earnings report. Revenue before traffic acquisition costs fell by a sharp 16%. Google had to cope with the same headwinds of having advertisers pay less for their online clicks, but at least it made up the difference in volume to grow its top line during the period.

Net income inched slightly higher at Yahoo!, but it can thank the near tripling of the "other income" line item for that. Operating profits at Yahoo! fell by a sharp 25%. If you think that's bad, check back in three months. Yahoo! sees a sequential decline in operating profitability for the current quarter.

The homepage redo also bears downplaying. The new page is an interactive playground of custom-tailored apps, hyperlocal news, and social-networking tools, but isn't Google's allure its plain-screen simplicity? The only reason we're even talking about portal combovers is that Microsoft hit it out of the park with Bing. Before that, did anyone really care what Time Warner's (NYSE: TWX  ) AOL or IAC's (Nasdaq: IACI  ) Ask.com was up to?

Bing was a freshly repurposed search engine, bumped into prominence by a massive marketing campaign. Yahoo! still has a long way to go on that and all other fronts.

Investors should give CEO Carol Bartz some time. This is only her first complete quarter. If she is going to work the same kind of growth magic that she ushered in at Autodesk (Nasdaq: ADSK  ) , analysts will have to wait longer.

Bartz doesn't get a free pass, though. She will also have to work harder.

Other headlines for your clicking pleasure:

Google is a Motley Fool Rule Breakers pick. Microsoft is a Motley Fool Inside Value recommendation. The Fool owns shares of Autodesk. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz thinks Yahoo! should drop the exclamation point. He owns no shares in any of the stocks in this article and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On July 22, 2009, at 11:17 AM, plange01 wrote:

    yahoo did better than google and is starting to show some real improvement .....

  • Report this Comment On July 22, 2009, at 1:49 PM, kpinvest wrote:

    "Investors should give CEO Carol Bartz some time. This is only her first complete quarter. If she is going to work the same kind of growth magic that she ushered in at Autodesk, analysts will have to wait longer."

    I think this is a very key statement. More and more of Yahoo! senior execs are leaving the company, for one reason or another. This type of management shuffle isn't surprising after getting a new CEO. Let's see what she can put out in the next year, two years, and see what type of Yahoo we'll see in the future.

    The new homepage probably was developed fairly quickly, since she came on board. As they try and shift the direction of Y! as a company. It's probably less important at this point to use that as a talking point as much as shutting GeoCities down, or some of their other older services, which will help them save money overall.

    It feels like Bartz wants to take it more to a portal concept. True, while Google is popular with the plain white page for search, some people just want a ton of information thrown at them in the portal format. I'm starting to use Y! again simply because I can use mint.com and several other features on one page. I use Google for search, lol.

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