Q. As a shareholder, can I realistically expect things to get any better at Yahoo Inc.?
C.G., via the Internet
A. Time might not be on Chief Executive Jerry Yang’s side.
The Yahoo founder who took the top position in June when Terry Semel stepped down must quickly enact an effective strategy to revive advertising growth. Otherwise, the company could wind up a buyout candidate.
Shares of Yahoo (YHOO) are down 11 percent this year following a decline of 35 percent last year; shares are barely above their level at the end of 2003. The company is beset by some fierce competition.
Of the $21.7 billion that U.S. advertisers are predicted to spend online this year, Yahoo is projected to hold 16 percent, while Google Inc. will have 27 percent, according to eMarketer. Similarly, Yahoo accounted for 22 percent of U.S. Internet searches in July compared with Google’s 64 percent, according to Hitwise.
Second-quarter net income at Yahoo was down 2 percent, and the company lowered its earnings guidance for the year.
Nonetheless, Yahoo remains one of the world’s most popular Web destinations, claiming 500 million unique visitors a month. It recently captured top spot for the first time in the University of Michigan’s Customer Satisfaction Index report on electronic-business Web sites. On a 100-point scale, it had 79 to Google’s 78.
Yahoo’s large user and technology bases are attractive to content providers, while Web mail and stock portfolio information help to tie customers to the firm. There is cash to spend on stock buybacks, acquisitions or content.
It spent $700 million to buy Right Media Inc. to help it sell more Internet ads emphasizing graphics. In display ads, its SmartAds, which change hue and design, are expected to contribute to results, and its Panama search advertising system had financial gains in the second quarter.
Straddling the many positive and negatives of Yahoo, consensus rating on its shares is between a “buy” and “hold,” according to Thomson Financial. That consists of four “strong buys,” 17 “buys,” 21 “holds” and one “sell.”
There has been takeover speculation due to the low stock price, but Yang expresses no interest in giving up the firm’s independence. Rupert Murdoch’s News Corp. reportedly offered to swap its social network site MySpace for a 25 percent share in Yahoo.
Earnings are expected to decline 19 percent this year, compared with the 27 percent increase forecast for the Internet information providers industry. Next year’s estimate of a 36 percent increase compares with 14 percent projected industrywide. The five-year annualized return is 22 percent versus 14 percent for its peers.
———-
More Top Picks Tp Link Deco X20
Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney @tribune.com.