Yahoo Earnings: Alibaba, Ad Growth and Other Areas to Watch

By Dow Jones Business News, 
A A A


By Douglas MacMillan

Without the life jacket of Alibaba, can Marissa Mayer stay afloat?

In the week marking Mayer's two-year anniversary as Yahoo's chief executive, investors may cast their vote on whether they believe her attempt to turn around the aging Internet portal is working.

Yahoo's second-quarter earnings, expected after the close of New York trading Tuesday, will likely be the first time in more than a year the company announces results without simultaneously disclosing any materially new numbers related to Alibaba, the Chinese e-commerce giant in which it owns a 24% stake. (Alibaba already opened its books in May, when it filed for an initial public offering.)

That means Mayer will no longer be able to hide sluggish growth in Yahoo's core business, which analysts expect to produce revenue of $1.08 billion, up 1% from a year ago, and 38 cents a share in profit, up from 35 cents a year ago.

Mayer and finance chief Ken Goldman will appear on a video conference call with analysts at 5 p.m. ET. Any details they share about the planned sale of 40% of Yahoo's stake in Alibaba in its IPO, and any hints about what they plan to do with the proceeds, will be closely watched.

Here are the key issues to watch for:

Advertising growth

Yahoo in April reported growth in its core business of display ads for the first time since Mayer took the reins in July 2012. Now we'll see if that was a fluke or if the CEO is winning back the marketing dollars her company has lost to Google and Facebook and moving ad growth further into the black.

Video

Some of Mayer's biggest bets of the year have gone toward building an online video portal to rival Google's YouTube, such as her acquisition last week of video-streaming startup RayV and her high-profile move to bring the sixth season of beloved TV sitcom "Community" exclusively to Yahoo. But she still hasn't said much about how soon this effort could generate material returns.

Alibaba proceeds

Analysts have estimated Yahoo could net as much as $10 billion from the sale of its Alibaba stake, and investors are thirsty for any indication of what Mayer intends to do with that money. While the CEO has only said the company plans to be "good stewards" of the capital - a hint that she's likely to distribute much of it to shareholders through buybacks or a dividend - she could tip more of her hand now that the IPO is coming into view. Is a multibillion-dollar acquisition, such as AOL, in the offing? "There will be a lot of people trying to read the tea leaves," said Brian Wieser, analyst at Pivotal Research.

Alibaba tax bill

Yahoo paid a hefty tax bill the last time it sold a portion of its Alibaba stake in 2012, and analysts expect it will again have to pay a full 35% rate on its capital gains. But CFO Goldman has said he's researching tax-avoidance schemes that could lower this bill, and shareholders will be listening closely on Tuesday's call for any suggestion Yahoo is pursuing one of these strategies.


  (MORE TO FOLLOW) Dow Jones Newswires
  07-15-141034ET
  Copyright (c) 2014 Dow Jones & Company, Inc.


This article appears in: News Headlines

Referenced Stocks: GOOGL , YHOO

Dow Jones Business News


More from Dow Jones Business News:

Related Videos

Stocks

Referenced

Most Active by Volume

48,099,947
  • $16.09 ▲ 0.50%
40,277,806
  • $102.50 ▲ 0.24%
40,236,499
  • $19.57 ▲ 2.35%
31,092,510
  • $49.75 ▲ 0.65%
30,795,218
  • $34.92 ▲ 0.78%
29,910,855
  • $3.63 ▲ 0.83%
24,019,154
  • $13.06 ▼ 0.38%
23,753,906
  • $74.82 ▲ 1.31%
As of 8/29/2014, 04:04 PM