Yahoo Q3 revenue dips, earnings up

New CEO Marissa Mayer called the quarter 'solid' and said she was satisfied with a 'stabilization' of revenue

Yahoo's revenue dropped slightly but earnings rose during the third quarter, the first complete one under the helm of new CEO Marissa Mayer.

Revenue came in at US$1.2 billion in the quarter ended Sept. 30, 2012, down 1 percent year on year. Subtracting commissions paid to advertising partners, revenue hit $1.08 billion, matching the consensus expectation from analysts polled by Thomson Financial.

Net income ballooned to $3.16 billion, or $2.64 per share, thanks to a net gain of $2.8 billion related to the company's sale of part of its stake in Alibaba Group back to this Chinese company. That compares to net income of $293.3 million, or $0.23 per share, in 2011's third quarter.

Excluding the Alibaba shares transaction, Yahoo still increased its earnings to $0.35 per share and topped analysts' consensus expectations of earnings of $0.26 per share.

After subtracting partner commissions, display advertising revenue was $452 million, flat year on year, while search advertising revenue came in at $414 million, up 11 percent.

Mayer, who came to Yahoo in July after a sterling career as a top Google executive, described the quarter in a statement as "solid" and said the company is "encouraged" by what it considers a "stabilization" of the display and search ad revenue.

Last month, Yahoo announced that it had completed its initial sale of Alibaba shares, from which it received around $7.6 billion -- $6.3 billion in cash and $800 million in preferred Alibaba shares. In exchange, Yahoo returned to Alibaba half of its 40 percent stake in the company, along with a $550 million payment for a technology and intellectual-property license agreement. Net cash and proceeds after taxes and fees from that first stage of the repurchase process totalled around $4.3 billion.

Yahoo retains a stake in Alibaba worth around $8.1 billion, so together with its preferred stock, Yahoo's remaining stake in Alibaba is around $8.9 billion. The second phase of the repurchase process allows Yahoo to monetize around half of its remaining stake whenever Alibaba launches its IPO, and the rest of its stake at its discretion afterwards.

Since coming on board, Mayer has revamped Yahoo's C-level suite, appointing new people to the chief operating officer, CFO, general counsel and chief marketing officer positions.

When appointed, Mayer was Yahoo's third CEO in less than a year.

Carol Bartz was fired in September 2011, and her replacement, Scott Thompson, only served between January and May of this year.

The board let Bartz go after losing confidence in her ability to turn the embattled company around, while Thompson, a former PayPal president, left in the midst of a controversy about his college education credentials.

In between Thompson's departure and Mayer's appointment, Yahoo was led by interim CEO Ross Levinsohn, a Yahoo executive vice president and head of Global Media. He left shortly after Mayer's arrival.

Yahoo has been on a years-long financial and technology slump, going through several executive shake-ups and rounds of layoffs.

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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Juan Carlos Perez

IDG News Service
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