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Yesterday Yahoo announced their second quarter earnings of 2011, prompting mixed feelings amongst shareholders. Whilst profits rose by 11%, advertising sales were weaker than expected and the former search engine saw a 5% decline in revenues compared to the same period in 2010.
With the finances seemingly a mixed bag, the issue of the Alibaba and the effort for ‘appropriate compensation’ over the sale of Alipay has not gone away [See: Yahoo Cagey Over Alibaba Affair]. However Carol Bartz, CEO of Yahoo, explains they’ve been negotiating with the Chinese e-commerce giant on a daily basis.
The news comes less than a week after Google announced their overwhelming $2.5 billion net income for Q2 [See: Despite Spending Big, Google Posts Huge Q2 Profits]. Such an impressive performance indicates the scale of the task other search engines, especially Yahoo, are facing.
According to earnings report, the company generated revenue of $1.08 billion or £670 million, excluding traffic acquisition costs. This presents a 5% decrease from last year, with Yahoo explaining that this is primarily due to the sharing of revenues with Microsoft in their Search Agreement [See: Are You Ready for the Yahoo/Bing Merger?].
Despite the drop in revenue, they did post an 11% increase in net earnings from $213 million in 2010 to $237 million in 2011. In addition their income from operations increased 9% from $175 in 2010 to $191 in 2011, and the value of their shares also increased from $0.15 per share in 2010 to $0.18 per share in 2011 keeping with analysts’ expectations.
Carol Bartz was left to describe these results as a “mix of good, encouraging and, at the same time, unsatisfactory”. When pushed on the issue of Alibaba she also revealed, “The company talked with the Chinese ecommerce giant every day. The deal is very complicated, thus sit needs more time to ensure whether its shareholders will obtain enough compensation” according to reports.
From what she revealed, the deal with Alibaba is far from sealed. Despite substantial progress, there is still a way to go. It appears the problem with this situation is that Yahoo is taking their eye off the ball.
Are the negotiations with Alibaba impacting their overall business growth? Well, according one analyst, Ben Schachter of Macquire Research, thinks they may simply be papering over the cracks, explaining “They are trying to fix a lot a problems that do need to be fixed, but unfortunately as they are fixing those problems, new ones are popping up. At the end of the day it’s another disappointment”, speaking to the BBC.
What’s worrying for Yahoo is that despite meeting analysts’ expectations, they’re still far away from restoring confidence in shareholders. Once some light is shed on the Alibaba situation, we’ll know a lot more.
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