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Yahoo Q3 2012: $152M Income On $1.089B Revenue


Yahoo has reported a net profit of $3.16 billion for the third quarter 2012, up from from $293 million reported in the same quarter, last year. It reported a revenue excluding traffic acquisition costs (“Revenue ex-TAC”) of $1,089 million for the third quarter of 2012, a 2% increase compared to the third quarter of 2011 and reported $1.202 billion of GAAP revenue for Q3 2012, down from $1.217 billion it had reported in Q3 2011.

It should be noted that Yahoo earned about $2.8 billion of its net profit from sale of its stake in the Chinese e-commerce business Alibaba. Excluding the Alibaba stake sales, Yahoo earned about a profit (GAAP) of $152 million for Q3 2012, that’s a 14% decline from the same quarter previous year where it reported an income of $177 million.

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Highlights:

- APAC region: Revenue generated from APAC regions decreased to $207 million for Q3 2012, while it was $222 million for the same quarter last year. APAC accounted for 6% of the total revenue generated.

- Americas: The display revenue for Americas region grew by 6% at $802 million, while it was $754 for the same quarter last year.

- Advertising: Display revenue, ex-TAC was $452 million, flat compared to the third quarter of 2011. GAAP display revenue was $506 million, a 1 percent increase compared to $502 million for the third quarter of 2011. Search revenue ex-TAC was $414 million, an 11 percent increase compared to $374 million for the third quarter of 2011. GAAP search revenue was $473 million, a 1 percent increase compared to $467 million for the third quarter of 2011.

 - Operating income on a non-GAAP basis was $177 million in the third quarter of 2012 compared to $175 million in the third quarter of 2011. On a GAAP basis, income from operations decreased 14 percent to$152 million in the third quarter of 2012, compared to $177 million in the third quarter of 2011.

- Yahoo closed the initial stage of its share repurchase agreement with Alibaba, receiving pre-tax proceeds valued at $7.6 billion, $6.3 billion in cash and $800 million in preferred shares, as well as a payment of $550 million related to a technology and intellectual property license agreement –  at 3Q, this amount was $4.5 million, however, in 4Q and beyond, Yahoo said that it will recognize approximately $34 million of additional revenue per quarter.

- Yahoo repurchased $190 million shares for the third quarter of 2012.

- Yahoo reported free cash flow of $920 million in the quarter. Excluding the $500 million TIPLA payment, free cash flow was $370 million in the quarter, which is up 50% from the prior year. Cash and investments balance at the end of the quarter remained at $9.4 billion. However, approximately $2.5 billion of this is reserved for payment for taxes on the Alibaba transaction.

- Yahoo reported employee count of 12,000 by the end of this quarter, a good 12 percent down from Q3 2011 when it reported an employee count of 13,700.

- Yahoo Pageviews: For the 2012 London Games, Yahoo had over 3 billion page views — more than its page views for the Beijing and Vancouver Games combined. During the first two weeks of the political conventions, Yahoo had 45% more page views and 35% more time spent on its election-related experiences compared to 2008.

Highlights from conference call:

- Mobile: In the conference call, Marissa Mayer, Yahoo CEO, said that Yahoo has made investments in new mobile phones for their employees so they can test their products and provide feedback. She also mentioned that as a part of Yahoo’s mobile efforts this quarter, they have redesigned their mobile search page across 23 countries, resulting in increased usage. They have also released an updated version of Flickr for Android and have launched IntoNow 3.0, a social platform to interact with friends about TV.

When questioned by Carlos Kirjner, Sanford C. Bernstein & Co., LLC., Research Division, whether Yahoo could succeed in mobile without its own smartphone OS, Mayer said that not having a smartphone OS allows Yahoo to provide its service to all smartphone OSs.

- Marissa Mayer also talked about the need to bridge its current product offers including Mobile, Finance, News, Sports, Games, Messenger, Flickr, Answers, and Groups.

- On Acquisitions: Mayer said that Yahoo will be looking for smaller-scale acquisitions that’s much more in the size and scale of double-digit millions and low hundreds of millions.

- On hiring: Mayer hopes to have half of their engineers to be working on mobile in future. Since Mayer took over Yahoo as its CEO, she has hired Ken Goldman as CFO, Kathy Savitt as CMO, and Henrique De Castro as COO.

- Yahoo did not report unique visitors, page views, and number of users to its website and other service. Mayer in the conference call said that Yahoo will depend on internal analytics for the pageviews rather than external analytics and that Yahoo will report these stats later.

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