Yahoo reports operating loss in third quarter results; partners with Google to boost sagging sales

Yahoo! Inc. reported sub-par operating results for the third quarter of 2015, including an $86 million loss from operations and a plunge in net income to $76 million from $6.8 billion year-on-year.

CEO Marissa Mayer, whose campaign to turnaround Yahoo’s sagging fortunes is hitting increasing turbulence, said Yahoo’s Q3 revenue rose 6.8 percent, or to $1.226 billion from $1.148 billion. The company’s revenue and profits, however, were below Wall Street’s expectations.

Particularly worrisome was the huge drop in net income, which analysts said was caused by the absence of a massive one-off profit booster like Yahoo’s huge earning in Q3 2014 when it sold some of its stake in Alibaba Group Holding Ltd, China’s leading e-commerce firm. Yahoo intends to unload its remaining 15 percent stake in Alibaba in the coming months, said The New York Times.

In a conference call, Mayer admitted to investors Yahoo was “continuing to face revenue headwinds in our core business”. The upside to this caution was that Yahoo will soon reveal a plan to streamline and focus the company.

What is known is this plan includes a new deal with Google to boost advertising revenues. What is unknown but probable are huge staff cuts and the sale of some companies owned by Yahoo.

Mayer said she’ll provide more details about how this “unique moment for Yahoo to narrow our strategy” will help the company in the next three months.

"Our Q3 results were largely within our forecasted expectations -- our GAAP revenue grew 7% year-over-year and our Mavens revenue grew 43%”, said Mayer. “As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability”.

Mavens is a unique metric Yahoo uses to rate its operations. It stands for Mobile, Video, Native and Social ads. Yahoo said revenue growth from Mavens this Q3 jumped 43 percent to $422 million. In September, Yahoo acquired Polyvore, a social shopping site, to boost its Mavens growth strategy.

In October, Yahoo cut a deal with Google that provides Yahoo with additional flexibility to choose among suppliers of search results and ads. Google's offerings complement the search services provided by Microsoft, as well as Yahoo's own search technologies and ad products.

Google will provide Yahoo with search ads on both desktop and mobile platforms under the three-year agreement. Google will pay Yahoo a percentage of the gross revenues from ads displayed on Yahoo. The percentage will vary depending on where the ads are displayed, said The Wall Street Journal.

For Q4 2015, Yahoo projects revenue between $1.16 billion and $1.2 billion. Yahoo is beset by a steadily falling stock price and a continuing exodus of top managers, both of which complicate its turnaround plan.

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