Yahoo’s June quarter results unlikely to please investors

The company registered an increase of 51 percent over last year in net income to earn $213 million.

Revenue is the concern
The worrisome parameter for the company has been sales, which rose merely 2 percent to $1.6 billion. Excluding traffic acquisition costs, Yahoo registered sales of $1.13 billion, representing zilch growth.

Chief Financial Officer Tim Morse admitted, "Revenue fell a little bit short for us, so plenty of work still to do." He opined that currency fluctuations also hampered sales.

"They continue to struggle," said Clay Moran, an analyst at Benchmark Co. "They really haven’t been able to get a handle on this search business and trying to turn it back to positive growth," added Moran.

The gains from display advertising, which increased 19 percent, were, to some extent, offset by an 8 percent drop in search advertising revenue.

According to Nielsen Co, surfers are not spending adequate time on the site. The average time that a visitor spent on the site was 2 hours and 11 minutes in June, down from 2 hours and 56 minutes in December of 2009.

Meanwhile Google Inc., which leads the internet-search market, is growing at a decent rate. In the June quarter, Google registered 24 percent growth in gross revenue over the last year. In the same period, Yahoo has managed 2 percent revenue growth.

Hits and misses
Yahoo has inked pacts with social-networking sites. It has "deepened its integration with Facebook" through Yahoo! Pulse, which enables users link the two accounts and share updates with friends across both networks.

The company has invested in other properties by acquiring Indonesia based social network Koprol.

The company has struck a 10-year agreement with Microsoft wherein it will use Microsoft’s Bing search product on its sites and sell ads adjacent to the results.

However, Yahoo, under the stewardship of Chief Executive Officer Carol Bartz, has not been able to make inroads in the internet search market. It has therefore not been able to capitalize on one of the most lucrative and fast-growing sources of online advertising.

"They continue to struggle," said Clay Moran, an analyst at Benchmark Co. "They really haven’t been able to get a handle on this search business and trying to turn it back to positive growth," added Moran.

Analyst Eric Savitz opined, "None of this is to suggest that Yahoo can’t turn things around; it still get huge amounts of traffic, and has millions of loyal users for many of its properties. But the lack of growth is making the Street restless.

"Bartz inspires confidence, she’s big on taking decisive action, but for all her efforts, the company still isn’t growing. At some point, Yahoo is going to need a more clearly defined growth strategy - and it will have to execute on it," added Savitz.