Yahoo! thanks! Asian! equity! for! 36! PERCENT! income! boost!
Irony police circle as Jerry Yang's far-sighted deal buys Mayer more time
Yahoo! has beaten Wall Street expectations by reporting a 36 per cent year-on-year increase in net income last quarter, but CEO Marissa Mayer has investments in Yahoo! Japan and Chinese e-commerce giant Alibaba to thank for the respite.
The ailing firm has been undergoing a minor renaissance since the former Googler took over at the helm and seemed to continue this with net income rising to $390 million (£253.9m) in Q1 2013.
However a closer look at the balance sheet shows that a whopping $217.6m (£141.7m) of this figure came from Yahoo!’s equity in businesses in Asia.
It currently has a 33 per cent stake in Yahoo! Japan, the web portal biz it set up with mobile operator Softbank back in 1996, and 20 per cent of China’s hugely successful Alibaba Group.
Even the income injection these equity interests brought, however, wasn’t enough to disguise the fact that Yahoo!’s revenue dropped seven per cent year-on-year to $1.14bn (£742m), with display ads in particular down a worrying 11 per cent to $455m (£296m), worse than analyst expectations.
Mayer will have her work cut out turning that part of the business around in the face of fearsome competition from Facebook and Google, but Alibaba’s continued success will give her more time, especially to come good on plans to build out Yahoo!’s mobile business through acquisition.
Privately-owned Alibaba is valued at something like $14bn (£9bn) now and although Yahoo! has already cashed in half of the stake which co-founder Jerry Yang invested back in 2005 in return for an impressive $7.6bn (£4.9bn), it will keep the remaining 20 per cent until Alibaba goes public.
When that will happen is still not clear, although Mayer will certainly be hoping not this side of 2014.
Rumours have already been circling that Alibaba could hand back the Yahoo! China brand next month, as it looks to put more distance between the two and ditch what has become an increasingly marginalised part of its business. ®