Yahoo’s first-quarter earnings beat analysts’ expectations. Net income in the first quarter increased 36 percent to $390 million, or 35 cents a share, from the same quarter a year ago. Wall Street analysts had expected net income of 24 cents a share. Its first quarter operating income was $186 million. Revenue decreased to $1.14 billion, down 7 percent from the year-ago quarter. Revenue was flat at $1.07 billion when traffic acquisition costs were excluded. Yahoo’s display ad business fell 11 percent in the first quarter, to $455 million, compared with a year ago.
However, Yahoo is doing better as an investment house than as an Internet company. Much of the increase in earnings was from its investments abroad. Yahoo retains a 20 percent stake in Chinese Internet company Alibaba, along with othe r. The income contribution from Yahoo’s equity interests in Alibaba and Yahoo Japan was $217.6 million.
Alibaba is preparing for an initial public offering. Analysts predict the value could be set anywhere between $55 billion to more than $120 billion. This is double to five times more than Yahoo’s $26.2 billion market capitalization. Colin Gillis, an Internet analyst at BGC Partners, said, “If you own Yahoo for Alibaba, you’re doing just great. But if you own it for the core business, you’ve got some speed bumps.”
Yahoo is at a critical juncture for Marissa Mayer. Since began Ms. Mayer leading Yahoo nine months ago, the company’s stock has increased by more than 50 percent. She is planning to hire engineers to improve Yahoo’s core products and optimize them for Yahoo’s mobile and tablet users. Ms. Mayer has also said she plans to accelerate the development of Yahoo’s mobile presence through “smaller-scale acquisitions” of mobile app companies. She has acquired six start-ups since joining Yahoo. The company now has more than 300 million monthly mobile users, up from 200 million three months ago. Investors are eager to see whether the plan can increase revenues.
