Analysts are unimpressed with Yahoo! Inc's. [
YHOO] third-quarter results or its future prospects. The company Tuesday night
reported quarterly earnings that reflected the slowing economy, leading the company to lower its revenue guidance for the fourth quarter. Yahoo! also announced it would cut 10% of its
work force, or roughly 1,500 employees, saving it $400 million.
In a research note Jefferies & Co. analyst Youssef Squali calls the results "mediocre" and says they "are not likely to sit well with [Carl] Icahn and the many other investors who saw management turn down the $31/share Microsoft [
MSFT] offer." While the top priority for Yahoo! CEO Jerry Yang is getting through the economic meltdown, "Icahn isn't that patient and his top priority seems to be maximizing shareholder value now," the analyst adds. Squali says that if Yang is to remain at the helm, a major stock buyback and/or the sale/spin-off of the company's Asian assets "may be a good compromise."
Meanwhile, in his note Stifel Nicolaus analyst George Askew asks Yahoo!, "Where's the value creating strategy?" Asserting that "fear and greed are the two great motivators of man," he notes that the market learned last spring that "greed failed to motivate Yahoo! management to create shareholder value when it rebuffed Microsoft's $33 acquisition offer." Now, he says, with Yahoo!'s shares trading around $13, "It appears that fear is [a] great motivator of Yahoo! executives, in our view, fueling a 10%+ global headcount reduction to support profitability."
Askew believes the key to near-term improvement for the company is approval of its search outsourcing agreement with rival Google Inc. [
GOOG], though he also says the new advertising platform Yahoo! adopted in the third quarter has "great promise." He continues to maintain a 'buy' rating on the shares, believing that its assets are worth "substantially more than the current share price if only management would focus on creating shareholder value." As a starting point, he says Yahoo! should sell its Asian Internet assets and repurchase its shares.
Early in Wednesday's session, Yahoo! shares were up 5%, to $12.63, despite losses in the broader market.
-- David ShabelmanSee Oct. 21 post from CNET News
See Oct. 22 post from Silicon Alley Insider
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