2 min read

Yahoo Net Income Drops More Than 37% In 3Q

Net income for the quarter ended Sept. 30 fell to $159 million, while revenues rose 19% to $1.58 billion. Yahoo is "not satisfied" with its performance, says Terry Semel, chairman and CEO.
Yahoo Inc. on Tuesday reported a more than 37 percent drop in net income in the third quarter, as the company saw a weakening in ad sales and a tenfold rise in the cost of stock-based compensation.

Net income for the quarter ended Sept. 30 fell to $159 million, or 11 cents a share, from $254 million, or 17 cents a share, for the same period a year ago. Revenues for the quarter rose 19 percent to $1.58 billion from $1.33 billion a year ago.

However, excluding revenues that go to partners to help drive traffic, Yahoo's take of sales was $1.12 billion, compared with $932 million a year ago.

Holding down earnings was a big jump in stock-based compensation expenses, which soared to $80 million in the quarter from $8 million a year ago. In addition, the company reported last month that it saw a weakening in online advertising that would hurt earnings. It projected that third-quarter revenues would fall in the low end of its forecast of between $1.11 billion and $1.22 billion.

"While we are tremendously excited about many things happening at Yahoo, we are not satisfied with our third quarter financial performance," Terry Semel, chairman and chief executive of the Sunnyvale, Calif., company, said in a prepared statement.

"We know we have work to do, but we are confident that Yahoo has the talent and resources to strengthen our leading position on the Internet, capitalize on the huge growth opportunities ahead, and deliver significant returns to shareholders," he said.

Semel told analysts in a conference call that the company had released "Project Panama," an upgrade of the company's advertising platform that was scheduled to launch later in the year. Yahoo is hoping the new platform will boost ad sales, and make it a stronger competitor against Google Inc.

For the fourth quarter, Yahoo projected revenues from $1.15 billion to $1.27 billion, and gross profits between $957 million and $1.04 billion. For the full year, the Web portal expected revenues between $4.48 billion and $4.6 billion, with gross profits ranging from $3.7 billion to $3.78 billion.