It's Not Too Late for Yahoo!

What will it take for Yahoo! (Nasdaq: YHOO  ) to shed the exclamation point from its corporate moniker?

Last night's quarterly report certainly wasn't the stuff to be shouted from the rooftops. Revenue before traffic acquisition costs slipped 3% to $1.169 billion, just shy of the $1.19 billion that analysts were targeting. Earnings slipped by 5% to $296 million, though it was flat on a per-share basis after Yahoo! spent $1.6 billion to repurchase 110 million shares in 2011. Nailing the $0.24 a share mark where the pros were parked is welcome, but it probably wouldn't have gotten there without the aggressive stock buybacks.

Yahoo!'s plan to outsource its search business through Microsoft (Nasdaq: MSFT  ) in exchange for meaty royalties and focus on display advertising hasn't paid off so far. Display advertising revenue actually fell by 4% during the quarter.

The silver lining here is that operating margins and pre-tax profits did improve during the period. A light provision for income taxes in the prior year's fourth quarter is the real reason why we're not talking about earnings heading in the right direction.

However, Scott Thompson -- poached from eBay's (Nasdaq: EBAY  ) PayPal earlier this month to be Yahoo!'s new CEO -- will have his hands full.

Unlike PayPal, which seems to grow practically on cruise control given its viral nature, Yahoo! is a company where revenue has been meandering for years. Yahoo!'s 3% decline in revenue before traffic acquisition costs is laughable when pitted against that metric's 28% spike at Google (Nasdaq: GOOG  ) during the same three months.

Speculators have been bidding up shares of Yahoo! in recent weeks, but it has nothing to do with its fundamentals. The expectations are running high that Yahoo! will either get bought out or unload its valuable Asian assets on favorable terms.

However, we can't write off Yahoo! itself. Speculators may be viewing this as a value-minded asset play, but as long as Yahoo! is able to draw as much traffic as it does -- and this is still a dot-com juggernaut with 11 properties that are top draws globally -- a growth revival is always possible.

Yahoo! may be looking to cash out of its Asian assets, but there are three American companies set on dominating the world. It's a free report, and it's yours now.

The Motley Fool owns shares of Microsoft, Yahoo!, and Google. Motley Fool newsletter services have recommended buying shares of eBay, Yahoo!, Microsoft, and Google. Motley Fool newsletter services have also recommended creating a bull call spread position in Microsoft and writing puts in eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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