There isn't a lot to get excited about in assessing Yahoo!'s
Revenue before traffic acquisition costs fell 6% to $1.06 billion. However, once you back out the impact of Yahoo!'s search deal with Microsoft
Display advertising climbed 10% during the period, but the slide in paid search offset that gain. Even if you account for Microsoft's 12% share of Yahoo!'s net revenue, shouldn't Yahoo! be gaining ground here? Google
Yahoo!'s stock has been meandering in the teens so long that it probably has a Justin Bieber poster on its wall.
It can't sink into the single digits, because it has valuable Asian investments and a cash-flush balance sheet. Breaking out of the teens to hang with the 20-somethings would be ideal, but it's not going anywhere until it shows that it's capable of growing again.
Yahoo! earned $0.19 a share for the quarter before backing out a Yahoo! Japan impairment charge. When you back out positive one-time charges from the prior quarter, Yahoo!'s earnings actually grew by a smart 23%.
Unfortunately, viewing Yahoo! as a margin-milking machine can only take the stock so far. How many more merely adequate quarters will investors put up with before demanding that Yahoo! spend its stash of cash on needle-moving acquisitions?
As long as Yahoo! can draw the masses to its site, anything is possible. The site just needs to start making things happen.
What would you do to turn Yahoo! around? Share your thoughts in the comment box below.
Google and Microsoft are Motley Fool Inside Value recommendations. Google and VMware are Motley Fool Rule Breakers recommendations. Yahoo! is a Motley Fool Global Gains pick. Motley Fool Optionshas recommended a diagonal call position on Microsoft. The Fool owns shares of Google, Microsoft, and Yahoo!. Alpha Newsletter Account, LLC owns shares of Microsoft. 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 invest.
Longtime Fool contributor Rick Munarriz wonders whether Yahoo! CEO Carol Bartz regrets her decision to lead Yahoo!. He does not own shares in any of the companies in this story. He 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, and it's got mail.