Yahoo shares took a hit Wednesday morning after the company reported disappointing second-quarter sales. Despite seeing profits rise, Yahoo missed analysts’ estimates.
Yahoo generated sales of $1.13 billion, excluding revenue passed on to partner sites, in the second quarter. That’s a two percent gain over the second quarter of 2009. Yahoo’s net income rose to $213.3 million, or 15 cents a share, from $141.4 million, or 10 cents a share, in the year-ago period.
Yahoo profits rose 51 percent, buoyed in part by 19 percent year-over-year growth in display advertising. But search advertising dipped eight percent. The positive news didn’t overcome analyst disappointment, and its stock fell as much as eight percent in pre-market trading. Analysts expected Yahoo to post second-quarter earnings of 14 cents a share on $1.16 billion net revenue.
The Bartz Spin
“We’re pleased that we continued to deliver strong operating income and margin expansion,” said Yahoo CEO Carol Bartz. “Our search fundamentals are improving and we posted another quarter of healthy display advertising growth.”
Bartz has to remain optimistic in the second year of the turnaround effort she’s spearheading, despite the fact that Yahoo continues to lose momentum in the search market. Yahoo’s story is that it’s continuing to progress toward its objectives. But Yahoo seems to be moving too slow, much like the general economy, even while Google and Apple defy the recession.
“Yahoo is in an enormously competitive environment, especially with Facebook on the one side with display advertising and Google on the other side with its dominance in the search space,” said Greg Sterling, principal analyst at Sterling Market Intelligence. “Investors were disappointed and some of the analysts were critical that it came in below the guidance.”
What Yahoo Needs To Do
Under Bartz, Yahoo appears more disciplined. The company has looked at cost-cutting measures to drive up margins. But…