Yahoo Earnings Review Q3 2015

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Internet giant Yahoo! Inc (NASDAQ:YHOOYahoo! Inc (NASDAQ: reported its Q3’15 earnings this week (October 20), with lower than expected revenues and EPS results followed by a lower than expected Q4’15 guidance. In an earlier article before Yahoo’s earnings conference call, I highlighted that investors are looking for core business figures in anticipation of the company proving that it had more to offer than the Alibaba (NYSE:BABAAlibaba (NYSE: stake. However, in its earnings results and during the conference call, Yahoo proved the opposite: It has nothing to offer its shareholders other than the Alibaba stake and a tax-free spin-off into Aabaco.

Core Business Continues To Decline

Let’s start with the core business. Yahoo reported declining revenue ex-TAC figures across the board, which include a 13% YoY decline in search revenues, a 16% YoY decline in other revenues, and a modest percentage growth in display revenues. That small increase in display revenues didn’t prevent Yahoo’s total revenues ex-TAC to drop YoY by 8% as shown in the table below.

The core business geographic segment data reveals an even more disappointing picture – Yahoo’s revenues Ex-TAC dropped YoY in all geo segments: the Americas dropped 5 percent, EMEA by 18 percent, and Asia Pacific by 18 percent. If that wasn’t enough, the company announced that it is closing down its video content business and writing off $42M worth of assets. CFO Goldman commented on that by saying, “We thought long and hard about it, and what we concluded is certain of our original video content. We couldn’t see our way to make money over time.” Even though the write-off amount is not massive, Yahoo is quietly shutting down a service it was so proud of last year. When it started, it made a lot of buzz with Community and Sin City and now closed the business because Yahoo can’t see how to make money out of it. This makes investors feel uncomfortable with the management skills to steer this ship out of trouble.