Yahoo results disappoint, raise pressure on Bartz

Yahoo’s uninspiring quarterly sales forecast has highlighted how the one-time internet leader is struggling to keep up with Google and Facebook.

Investors have pressured Yahoo, the leader in display advertising, and chief executive Carol Bartz to deliver growth and revive its stock price, amid talk that private equity firms are exploring a buyout of the $20 billion company, possibly pairing up with AOL or News Corp.

“She was already on the hotseat. I don’t think she’s off the hotseat. The results have not shown any kind of real improvements,” analyst Yun Kim of Gleacher & Co said of Bartz.

During a conference call with analysts, Bartz defended the company’s progress on her watch, citing improvements to Yahoo’s technology that have made it nimbler, as well as a doubling in operating margins to about 12% in the third quarter.

“We’re working to reverse years of decelerating growth,” said Bartz, who joined in 2009 and has since laid off staff and shed various web businesses.

Results

Yahoo said revenue from search ads fell 7% year-over-year, though executives said the 1% increase in revenue-per-search marked the first increase in two years. And the company said it expected the transition to Microsoft’s search advertising system in the United States and Canada to be completed by the end of the month.

Yahoo projected fourth-quarter revenue, excluding traffic acquisition costs, of $1.125 billion to $1.225 billion. Analysts were looking for revenue of $1.26 billion.

“We feel pressure to execute on our plan, as we should. We need to deliver on our plan to deliver shareholder value. And when we do that the share price will take care of itself,” chief financial officer Tim Morse told Reuters.

“We’re doing a terrific job in some areas. In others, we’re clearly in transition, and I think it’s fair to want to see more from us in the future before people believe fully in the (growth) targets.”

Net income in the three months ended September 30 was $396.1 million, or 29 cents a share, compared with $186 million, or 13 cents a share, in the year-ago period. But Yahoo said its earnings included a 13 cent benefit from the sale of its HotJobs web service. Analysts had expected earnings of 15 cents a share.

Net revenue, which excludes revenue it shares with website partners, totaled $1.12 billion in the third quarter, compared with $1.13 billion in the year-ago period and slightly below the $1.13 billion expected by analysts.