Yahoo! Q3 Profit Soars, Tops Estimate

(RTTNews) - Yahoo! Inc (YHOO) Tuesday reported a surge in third-quarter profit, on gains from stake-sale in the Alibaba IPO and an improvement in search business, while display advertising revenues continued to slide. Both earnings and revenue for the quarter topped Wall Street estimates.

Shares of Yahoo climbed 4 percent in the initial after-hours trade on the Nasdaq, but later shed some of the gains. The stock is now up 2.19%.

"We achieved this revenue growth through strong growth in our new areas of investment - mobile, social, native and video - despite industry headwinds in some of our large, legacy businesses," said Yahoo CEO Marissa Mayer.

Yahoo CEO Marissa Mayer has been under pressure from Starboard Value LP, which had acquired a significant stake in Yahoo. The hedge fund has has been urging the company to seek a combination with AOL Inc (AOL), cut costs and monetize its non-core equity investments.

Under Mayer, Yahoo went through some refurbishing and introduced a suite of web, mobile, and video ad products. Nonetheless, Starboard says more remains to be done to spur growth. But a trump card for Yahoo is its stake in Alibaba that had the biggest IPOs in the U.S. stock market history.

Yahoo, based in Sunnyvale, California, posted quarterly net earnings of $6.8 billion or $6.70 per share, compared with $297 million or $0.28 per share last year.

Results for the quarter included a gain from sale of Alibaba Group Holding Ltd (BABA) shares of $6.3 billion, net of tax.

Excluding items, adjusted earnings for the quarter were $0.52 per share, compared with $0.34 per share a year ago.

On average, 23 analysts polled by Thomson Reuters estimated earnings of $0.30 per share for the quarter. Analysts' estimates typically exclude special items.

Yahoo sold 140 million American Depositary Shares through the Alibaba initial public offering, and retains 383.57 million ordinary shares of Alibaba, representing about 15 percent of Alibaba's outstanding ordinary shares.

Yahoo posted quarterly revenues of $1.15 billion, compared with $1.14 billion in the prior year.

Excluding traffic acquisition costs, revenues for the quarter were $1.09 billion, compared with $1.08 billion a year ago. Twenty-three analysts had a consensus revenue estimate of $1.04 billion for the quarter.

Revenue from search business, excluding TAC, climbed 6 percent from last year. The number of paid clicks was flat compared with a year ago, and price-per-click grew about 17 percent.

Revenue from display advertising, excluding TAC, slid 6 percent from last year. The number of ads sold increased about 24 percent, but price-per-ad fell in the equivalent, Yahoo said.

Yahoo is hopeful of growth in mobile revenues. Yahoo reported about $200 million in mobile revenue for the quarter and expects more than $1.2 billion in mobile revenue this year.

Recently Yahoo laid off about 400 employees in India as part of cutting costs in its foreign operations. It also closed its office in Jordan and eliminated 80 positions.

Yahoo closed Tuesday at $40.18, up $0.90 or 2.29%, on a volume of 34 million shares. In after hours, the stock gained $0.85 or 2.14% at $41.04.