Yahoo Inc. has shuffled chief executives, upgraded its online advertising platform and forged several promising partnerships during the past year, yet the Internet icon still does not seem close to pulling out of a slump that has battered its stock.
Even Yahoo's new CEO, co-founder Jerry Yang, acknowledged Tuesday there is still plenty of hard work to be done.
"I am very aware of the challenges we face," Yang said in a conference call with analysts after the Sunnyvale, California-based company said second-quarter earnings slipped 2 percent. "There is a significant gap where we are today and where we need to be."
This was the sixth consecutive quarter in which Yahoo's profit has dropped from the previous year.
The company's shareholders have paid a steep price for the company's bumbling. Since the end of 2005, Yahoo's stock price has plunged more than 30 percent to wipe out about $20 billion (EUR 14.52 billion) in shareholder wealth.
The company's shares shed $1.13, or 4.1 percent, after Yahoo lowered its forecast for the remainder of the year to compound the disappointment caused by its second-quarter results. The stock ended Tuesday's regular trading session at $27.53.
Yang, who replaced Chairman Terry Semel as CEO a month ago and remains one of Yahoo's largest shareholders, assured there will be "no sacred cows" as he spends the next 100 days analyzing which parts of the business should be jettisoned so the company can focus its resources on developing products and services that will revive earnings growth.
The overhaul is not likely to include mass layoffs, according to Yang and other executives who participated in Tuesday's call. The management team emphasized the company's work force will likely expand from the 12,400 employees on the payroll at the end of June, with most of the hiring focused in its online search and advertising departments.
But the patience of Yahoo shareholders may be wearing thin after listening to Semel's broken promises of an imminent turnaround.
The residual skepticism may give Yang little time to produce higher profits before exasperated shareholders rebel and pressure Yahoo into considering a sale to possible suitors like Microsoft Corp., said RBC Capital Markets analyst Jordan Rohan.
"This is growing old," Rohan said. "I would like to see more immediate changes. Things are looking pretty bleak right now."
Yahoo is pinning its hopes on a new advertising formula - known as Panama - that rolled out this year, as well as partnerships with online auctioneer eBay Inc., Comcast Corp. and more than 270 newspapers around the country. The company also hopes to do a better job selling Internet ads that rely on graphics and other visuals with its recently completed acquisition of Right Media Inc. for nearly $700 million (EUR 508.31 million).
But management offered little hope for better times this year. After subtracting commissions paid to its advertising partners, Yahoo expects its revenue for the full year to range between $4.89 billion (EUR 3.55 billion) and $5.19 billion (EUR 3.77 billion). In April, the full-year forecast anticipated revenue from $4.95 billion (EUR 3.59 billion) to $5.45 billion (EUR 3.96 billion).
In the three months ending in June, Yahoo earned $160.6 million (EUR 116.62 million), or 11 cents per share, down from net income of $164.3 million, or 11 cents per share, at the same time last year.
Revenue for the period totaled $1.7 billion (EUR 1.23 billion), an 8 percent improvement from last year. But the overall online advertising industry has been growing at a far faster clip, with Yahoo's biggest rival, online search leader Google Inc., leading the way.
Google's revenue soared by 63 percent during the first quarter and analysts believe the Mountain View, California-based company will report an increase in the same range when it announces its second-quarter results Thursday.
The Internet ad market is on track to grow by 29 percent this year, estimates industry research firm eMarketer Inc.
Excluding ad commissions, Yahoo said its revenue stood at $1.24 billion (EUR 900 million), an 11 percent increase from last year.
The earnings and revenue both matched the estimates among analysts surveyed by Thomson Financial.