Yahoo Stumbles Over Display Revenue and Outlook

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Shares of Yahoo (NASDAQ:YHOO) closed Tuesday’s regular session up 4.28 percent at $38.22, but fell as much as 5.5 percent in post-market trading after the Internet technology company reported fourth-quarter and full-year results. Although revenue was consistent with expectations and earnings beat the Street, display ad revenue and income from operations both declined.

Fourth-quarter GAAP revenue fell 6 percent on the year to $1.27 billion while revenue excluding traffic-acquisition costs fell 2 percent on the year to $1.2 billion, in-line with expectations. GAAP net earnings increased 40 percent on the year to 33 cents per share, while non-GAAP net earnings increased 31 percent to 46 cents per share, beating the mean analyst estimate of 38 cents per share.

Full-year GAAP revenue also fell 6 percent to $4.68 billion and revenue excluding TAC fell 1 percent to $4.43 billion, once again in line with the mean analyst estimate of $4.43 billion. GAAP net earnings for the year fell 62 percent to $1.26 per share, while adjusted (non-GAAP) net earnings increased 16 percent to $1.52 per share, beating the mean analyst estimate of $1.46 per share.

The killer, which drove shares down in post-market trading, was this: fourth-quarter display revenue fell 6 percent on the year to $553 million, while full-year display revenue fell 9 percent to $1.95 billion; fourth-quarter display revenue excluding TAC fell 6 percent on the year to $491 million, and full-year display revenue excluding TAC fell 9 percent to $1.74 billion. Excluding Yahoo’s Korea unit, the number of ads sold increased about 3 percent on the year in the fourth-quarter, and the price per ad decreased about 7 percent.

GAAP search revenue decreased, falling 4 percent on the year in the fourth-quarter to $464 million — but search revenue excluding TAC was actually up 8 percent on the year at $461 million (up 6 percent for the full year at $1.7 billion), as paid clicks increased about 17 percent while the price per click fell about 3 percent.

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