Yahoo earnings impress, the reason why might not

19 Oct 20167 Shares

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Yahoo. Image: Yahoo/Flickr/CC BY 2.0

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Yahoo has reported better-than-expected quarterly financials as its deal with Verizon nears, though question marks over how it made money remain.

It’s not easy running Yahoo. Business is contracting, the company is reeling from a massive hack and Verizon is going through its due diligence ahead of buying the company. Add to that a growing cabal of sceptical onlookers and Marissa Mayer’s job can be described as a tough one.

However, the CEO’s move to not answer questions after the posting of the company’s latest financials has left many wondering why.

Yahoo

One of the main positives coming out of the latest financials is the performance of Mavens (mobile, video, native and social advertising units), rising almost one-quarter to $524m.

Adjusted revenues of $1.31bn, up from $1.27bn on last year, were driven by improved income from search advertising, up from $509m to $703m this year. Or so it seems.

The $1.31bn in total revenues fell to $857m after deducting fees to partner websites, showing an actual drop of around 14pc.

Recode is taking a hard line on the results, claiming all the positives found in the detail come from cost-cutting rather than company growth, with the business tanking.

Recode’s Kara Swisher says the earnings per share have spiked due to cost-cutting alone. “Adjusted EBITDA, which is a real measure of performance, was down to $229.2m from $244.2m,” she said.

“I am pleased with our Q3 results,” said Mayer. “In addition to our continued efforts to strengthen our business, we are busy preparing for integration with Verizon.”

Verizon’s purchase of Yahoo, thought to be costing the former some $4.8bn, is in question following the massive data breach suffered by Yahoo last year.

In the biggest known breach of a company’s network, Yahoo confirmed that account details of 500m people were stolen by hackers in 2014.

The internet portal giant said the attack was by a “state-sponsored actor”, pointing the finger in the direction of government-backed Russian or Chinese hacker gangs.

Another blow to the company’s prospects was the news that Yahoo was actively cooperating with the US government to allow authorities scan its users’ emails using a custom software program.

This subsequently saw Verizon snoop around for a better deal, with suggestions of a $1bn reduction in the overall cost of the deal in recent weeks.

“We remain very confident, not only in the value of our business, but also in the value Yahoo products bring to our users’ lives,” said Mayer.

“To that end, we take deep responsibility in protecting our users and the security of their information. We’re working hard to retain their trust and are heartened by their continued loyalty as seen in our user engagement trends.”

Yahoo. Image: Yahoo/Flickr/CC BY 2.0

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Gordon Hunt is a journalist at Siliconrepublic.com

editorial@siliconrepublic.com