Once again, Yahoo! (NASDAQ:YHOO) proves that it's little more than a poor man's Google (NASDAQ:GOOG).
If you were blown away by Big G's fourth-quarter report last week, with revenue and earnings growing by 17% and 33%, respectively, its fading rival didn't do much to impress over the same three months.
Revenue before traffic-acquisition costs fell by 8% to $1.26 billion during Yahoo!'s final quarter of 2009. Earnings, before charges related to the company's restructuring and its search agreement with Microsoft (NASDAQ:MSFT), fell to $0.15 a share after the dot-com portal earned $0.17 a share a year earlier.
The silver lining is that analysts were expecting a profit of $0.11 a share on $1.23 billion in adjusted revenue. So Yahoo!'s showing is a relative victory, but clearly, it's not an absolute one.
"The fourth quarter marked a strong finish to 2009," notes CEO Carol Bartz in the release. I don't think she's trying to be funny. She's probably referring to the sequential improvement during the holiday-sparked quarter. Investors shouldn't get too excited, though. Yahoo!'s guidance for the current quarter points to a pronounced sequential dip in revenue and operating profits. In three months, we'll probably hear Bartz say that the first quarter marked a weak start to 2010.
One positive out of Yahoo!'s report is the $4.5 billion in cash and marketable debt securities. If Yahoo! doesn't have the secret sauce to grow organically, it may as well go shopping.
Despite the past 10 months of rallying stock prices, Yahoo! could still bag either AOL (NYSE:AOL) or IAC (NASDAQ:IACI) to pump up its diminishing market share in search. Facebook is out of its price range, but Twitter or LinkedIn would fit the bill -- and billfold -- if they would ever make themselves available. Yahoo! could also buy a handful of smaller dot-coms that would broaden its online-advertising empire. Marchex (NASDAQ:MCHX) and ValueClick (NASDAQ:VCLK) are a couple of logical targets that wouldn't break the bank.
Will Yahoo! make any needle-moving deals? Probably not. Will it begin to post year-over-year gains once the economy improves? Definitely. Will Google grow even faster -- and pad its perpetually widening lead? Of course.
What do you think Yahoo! needs to do to grow again? Share your suggestions in the comments box below.
