The Pros and Cons of Yahoo's Third Quarter Results

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Rumors of a pending takeover swirl as Yahoo reveals another quarter of less-than-impressive revenue results, according to industry observers.

Yahoo reported revenue of $1.6 billion for the third quarter of 2010, a mere 2 percent increase from the third quarter of 2009. Income from operations for the third quarter of 2010 was $189 million, an increase of 107 percent year over year. Excluding restructuring charges of $17 million in the third quarter of 2009 and $6 million in the third quarter of 2010, income from operations increased 80 percent year over year.

“We delivered a solid quarter with good display advertising revenue growth, big gains in operating income, and margins that were double what they were last year,” said Carol Bartz, president and CEO of Yahoo, in a statement. “Because we recognize the tremendous value of our assets, we also dramatically stepped up our stock repurchases. We’ve now bought back more than 7 percent of the company’s stock this year alone.”

Although Bartz has been struggling to put an end to takeover talk, one of her more significant achievements to date has been negotiating an alliance with Microsoft. Yahoo and Microsoft formed a Web search and advertising partnership a year ago – a formidable tag team as the two companies try to mount a joint offensive against Google. Under the agreement, Yahoo will use Microsoft’s search engine on its own sites while providing the exclusive global sales force for premium advertisers.

Even still, Yahoo trailed behind Google and MSN/Windows Live/Bing Search with a 13.1 percent share of U.S. searches, falling from a 14.3 percent share in July 2010 (a 1.2 percent drop), according to new data from Nielsen.

Another strategic move: Yahoo recently purchased online-ad technology firm Dapper in hopes of enhancing its display ads to advertisers. The company plans to complete the acquisition in the fourth quarter of 2010.




Edited by Tammy Wolf

TechZone360 Contributing Editor

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