SAN FRANCISCO – Yahoo Inc. will update investors on how its latest change in leadership has affected its tortuous turnaround efforts when the Internet company releases its second-quarter earnings
WHAT TO WATCH FOR: The report, due out after the stock market closes Tuesday, will reveal whether Yahoo was able to build on the modest momentum that it showed during the first quarter, despite the disruption caused when the company cast aside Scott Thompson as its CEO in May. Ross Levinsohn, who joined Yahoo in late 2010, has been running the company on an interim basis since Thompson lost his job in a flap over misinformation on his official biography.
On Monday, Yahoo announced the appointment of Marissa Mayer as the company's president and CEO. Mayer, a 37-year-old longtime Google executive, most recently oversaw product management, engineering, design and strategy for products including Google Maps, Google Earth, Zagat, Street View. She will join Yahoo on Tuesday as Yahoo's fifth chief executive in five years.
Before Thompson's abrupt ouster, he guided Yahoo to the first year-over-year increase in quarterly net revenue since 2008. Net revenue — the amount Yahoo keeps after paying advertising commissions — rose by less than 1 percent, but it nevertheless represented a ray of hope after 13 consecutive quarters of erosion.
Most analysts believe Yahoo's net revenue probably edged up slightly again during the second quarter, helped by gains from the ads that Yahoo has been selling to run alongside the widely watched news, sports, finance and entertainment video clips on its website. Much of that video is being provided by one of its newest partners, ABC.
Just as it did in the first quarter, Yahoo also is expected to get a lift from revenue generated from its large stakes in two of Asia's most successful Internet companies, China's Alibaba Group and Yahoo Japan.
Yahoo's earnings for the three months ending in June will be clipped by an anticipated charge of up to $145 million to cover severance costs for laying off 2,000 employees, or about 14 percent of its workforce. The jobs cuts, announced while Thompson was still CEO, are supposed to trim Yahoo's expenses by about $375 million annually.
Some analysts believe Yahoo will prune even more from its operations as it tries to increase its profits and elevate a stock that has been sagging since the company balked at a takeover offer from Microsoft Corp. for $33 per share more than four years ago. Yahoo's stock closed at $15.65 on Monday.
Levinsohn hinted that Yahoo might cut even deeper when he met with shareholders at the company's annual meeting last week.
Thompson had planned to close, sell or combine dozens of Yahoo's little-used services before he was dumped.
Levinsohn, 48, was widely considered to be the top candidate for Yahoo's permanent CEO slot. Now, the job of devising a new vision for Yahoo will fall to Mayer. She will need to quickly communicate how her strategy differs from the plans of four previous CEOs who have tried unsuccessfully to turn the company around during the past five years.
THE BIG PICTURE: Despite its financial lethargy, Yahoo's website remains among the most popular destinations on the Internet with 700 million monthly visitors. Its ability to develop compelling products and compete against other Internet companies such as Google Inc. and Facebook Inc. will hinge on its ability to revive its revenue growth.
WHAT'S EXPECTED: Analysts polled by FactSet project earnings of 20 cents per share on revenue of $1.09 billion, after subtracting Yahoo's ad commissions.
LAST YEAR'S QUARTER: Yahoo earned $237 million, or 18 cents per share, on net revenue of $1.08 billion a year ago.