Yahoo Shares Plunge on Weak Ad Revenue Numbers

Published by: Dave Simmons on 21st Jul 2011 | View all blogs by Dave Simmons
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Yahoo Shares Plunge on Weak Ad Revenue Numbers

Shares of the search engine Yahoo fell nearly 8 percent on Wednesday after the company released a disappointing earnings report after Tuesday's closing bell, citing weakness in its display advertising business caused by a restructuring of its sales force that left is understaffed to handle demand.  Yahoo's quarterly earnings of 18 cents per share matched analysts' expectations, and its revenue of $1.08 billion just missed the consensus projection of $1.1 billion.

The company's ad revenue, however, rose just 5 percent to $467 million.  On a conference call following the earnings release, CEO Carol Bartz explained that the weakness was caused by a recent restructuring.  “We did not have enough salespeople in front of the big clients,” Bartz said.  Yahoo once dominated the display advertising sector, but has faced increasing competition in recent quarters from rivals like Google and Facebook.

Analyst Doug Anumth from JPMorgan said in a massage to clients on Wednesday that he will maintain a “neutral” rating on Yahoo shares, acknowledging that the company has problems but saying they can be resolved over time.  “AOL went through a similar reorg in late 2009/early 2010, and it took about a year for the company to rebuild the pipeline and return to growth,” Anmuth explained.  Yahoo is in a better position that AOL, he added, since it has cleared out its low-quality inventory.

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