Yahoo Ready for the Olympics

Yahoo has of course been in the news lately because of its management changes. Last quarter, the company saw Scott Thompson leave the position due to misleading statements on his CV. His place was filled temporarily by Ross Levinsohn. Earlier this week, Marissa Mayer, former head of Google search, was hired as the company’s new CEO. After four failed CEOs, analysts believe that the young Mayer might just be the right person to help steer Yahoo out of its woes. Let’s take a look at what Mayer is dealing with.

Yahoo’s Financials
Yahoo’s (Nasdaq:YHOO) Q2 revenues grew nearly 1% over the year to $1.08 billion, shy of the Street’s target by about $16 million. EPS of $0.27 was, however, ahead the market’s projected earnings of $0.22 per share.

Revenues from online display ads grew 2% over the year to $535 million, while search revenues fell 1% to $461 million. Visitors to Yahoo’s websites grew 2% over the year, but queries on Yahoo’s U.S. core search websites fell 17%. The minutes visitors spent on their media properties also fell 10% over the year.

During the quarter, Yahoo bought back $456 million worth of stock. Last quarter, it also sold its 20% stake in Alibaba for an estimated $7 billion.

Yahoo’s Mobile Focus
Many believe that Yahoo!’s salvation may come from their focus on the mobile segment. Yahoo! is taking steps to improve their presence in mobile, and Mayer will have to push it forward at a faster pace, especially since both Apple and Google have gathered a massive lead ahead of Yahoo in creating mobile experiences.

Last quarter, Yahoo’s mobile revenues grew 50% over the previous year. The number may sound impressive because it was off a rather small base.

Earlier this quarter, Yahoo released a new mobile browser and search app, Axis. Although the management did not divulge details, they were pleased with Axis’s performance and popularity on the iPad. Axis helps users by displaying search results on the page the user is visiting, thus avoiding the need to navigate away from the page they were originally viewing. This is a very useful feature on a mobile device as navigating from a page to a search page and then to results can get very time consuming.

Yahoo’s Olympic Hopes
Yahoo is also counting on increasing user engagement through its Olympics coverage. Its “Beyond Gold” coverage through Yahoo Sport will provide access to video programs, breaking news, photos and analysis from Yahoo sportswriters. Users will also be able to read unique editorial series, play fantasy games, and engage through second screen experiences.

Yahoo Sports has been a favorite destination for sports coverage since the Turin Games in 2006. In Vancouver, their site was the leader across all major categories with 32 million unique visitors. The company is counting on its portal’s strength to continue to deliver during these Olympic games.

Yahoo Sports, along with Yahoo Finance, remains one of the strong areas in the company’s portfolio.

Yahoo’s stock is trading at $15.70 with a market capitalization of $19.13 billion. It touched a 52-week high of $16.79 in October 2011. Yahoo investors may be regretting the missed opportunity with Microsoft. In 2008, Microsoft was willing to acquire Yahoo shares at $31 apiece, translating to a market value of $44.6 billion. The stock has come a long way down since.

Mayer has a tough challenge ahead of her. Analysts are counting on her engineering and search background to help drive Yahoo back to its golden days. However, there are a few others who aren’t as convinced. Mayer is expected to go on maternity leave this October, making many wonder about her plans for the already ailing Yahoo. Analysts are also worried that by side-stepping Ross Levinsohn to appoint Mayer, the Yahoo! board may have antagonized good talent. Levinsohn has been a strong force in Yahoo’s media related accession. He helped Yahoo strike big deals, such as an agreement with ABC News where ABC is providing content on Yahoo websites. Analysts are worried that the new appointment may result in his departure, a move that they are not too thrilled about.

On the other hand, Marissa Mayer has just taken the reins of a deeply troubled company. If she can turn it around, her CEO career is off to a fantastic start. If not, no one will really blame her. In that sense, she has nothing to lose, and everything to gain. I would call that a brilliant career move, and I will eagerly watch what she does in her new role.