Yahoo's Stock Soars, Sales Remain Flat

There's been excitement on Wall Street about a turnaround at Yahoo since Marissa Mayer became head of the company last year. Mayer has completed high profile acquisitions and sought to improve worker morale. Second quarter revenues missed expectations as Yahoo struggled to corral advertising dollars.

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RENEE MONTAGNE, HOST:

One of the big stories in the business world over the past year has been Marissa Mayer's turnaround effort at Yahoo. Since taking over, she's made major acquisitions - like buying the blogging site Tumblr, and she's tried to improve worker morale.

Today is Mayer's first anniversary on the job. And as it happens, yesterday Yahoo reported its earnings for the year. The stock price is soaring, but sales are flat and revenue is down.

To discuss Yahoo's fortunes, NPR's Steve Henn joined us. Good morning.

STEVE HENN, BYLINE: Good morning.

MONTAGNE: So Steve, what should Wall Street make of Yahoo's new earnings report, which sounds, to me at least, like a mixed bag?

HENN: You know, it really was a mixed bag. And I think investors and analysts could choose to look at it in one of two ways. They could either focus on the numbers or they could choose to pay attention to the story Marissa Mayer is telling about Yahoo. And since she took over, she's argued that Yahoo needed a turnaround, and right now she says she's in the middle of it. The first thing she did was recruit great people. And then she said the company needed to start focusing on building exciting new products that would drive new traffic to Yahoo's site. That, Mayer says, is where Yahoo is now. Traffic is finally increasing. This is how Mayer put it.

MARISSA MAYER: Renewed traffic growth in the face of multiple years of decline is, to my knowledge, unprecedented among industry players that operate with billions of page views.

HENN: So that's Mayer in the earnings call yesterday. And she's arguing that if Yahoo focuses on quality products, eventually new revenue will follow. This is the same argument you hear from start-ups. Build the product first and worry about the money later. Now you're hearing it from an industry icon: Yahoo.

MONTAGNE: Well, what if investors don't want to worry about the money later? What in fact did the financial results look like?

HENN: They weren't that great. You know, in the U.S. market, Internet advertising is still growing really fast. Nationally, this industry expanded by something like 15 percent this year. Not only is Yahoo failing to keep pace with that expansion, it's actually losing ground. Revenues in its Internet ad business fell by double digits. That's in contrast to ad revenues at Yahoo's biggest competitors, like Google and Facebook and Twitter - all growing by double digits. So even though Yahoo's still quite profitable, its core business is shrinking. One bright spot financially for Yahoo is its stake in the Ali Baba Group. This is a Chinese e-commerce site that Yahoo invested in a few years ago. Yahoo still owns about a quarter of that company. Ali Baba is booming and it's gearing up for a big IPO. The long-term plan appears to be to sell off some its stake in these Asian properties and then reinvest that money domestically and hope for a hit.

MONTAGNE: And you know, we talk about morale - one thing that Marissa Mayer did this past year that actually created enough of a controversy that got her off the business pages and on the front pages was when she ended the company's policy of allowing people to work from home. How is company morale?

HENN: Well, you know, it's always tough to judge, but on the earnings call yesterday Mayer made the point of saying that Yahoos, as corporate employees are known, are as productive and focused as they've ever been. As the company's CEO, of course she had to say that. But she did have a few stats to back up these claims. The company is now receiving up to 10,000 applications a month for jobs there, which is a big step up. And many of those new applicants are former Yahoo employees who have decided that now could be a good time to come back. So those are both encouraging signs.

MONTAGNE: Now, there is one sort of odd thing Mayer started just this week, and that was allowing people to take over other people's old Yahoo email addresses if those addresses hadn't been used for a year. What is the company trying to do?

HENN: Well, I think they're trying to generate a little buzz. You know, if you've ever signed up for an email address at a popular site - say, Gmail - you probably weren't able to get your name. You might have had to settle for RMontagne, you know, 123. This is Yahoo's bid to lure people onto its email service with the possibility that they could get, you know, a much simpler email address than the one they're using now - or at least that's the hope.

MONTAGNE: Steve, thanks.

HENN: Oh, my pleasure.

MONTAGNE: That was NPR's technology correspondent Steve Henn speaking to us from Silicon Valley.

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