Yahoo! Profit Falls, Revenues Miss Street; Signs Deal With Google

(RTTNews) - Yahoo! Inc. (YHOO) on Tuesday reported a decline in profit for the third quarter, as last year's bottom line was boosted by sale of Alibaba shares. Revenues for the quarter rose only 7 percent, largely offset by traffic costs, and were below Wall Street estimates.

Sunnyvale, California-based Yahoo's profit dropped to $76.3 million or $0.08 per share from $6.77 billion or $6.70 per share last year. Last year's profit reflected the sale of stake in Alibaba Group Holding Ltd. during the company's IPO.

On an adjusted basis, earnings dropped to $0.15 per share from $0.52 per share last year. Analysts polled by Thomson Reuters estimated earnings of $0.17 per share.

Yahoo's revenue's for the quarter rose 7 percent to $1.23 billion from $1.15 billion last year. However, revenues fell short of analysts' consensus of $1.26 billion on Thomson Reuters.

Traffic-acquisition costs rose to $223.2 million from $54.2 million last year as Yahoo has begun paying its partners Mozilla and Oracle more money for users.

CEO Marissa Mayer is striving hard to turnaround Yahoo, however, she still faces numerous challengers in order to bring the company back to a higher growth trajectory. Mayer has made acquisitions like fashion site Polyvore and blogging site Tumblr.

"As we move into 2016, we will work to narrow our strategy, focusing on fewer products with higher quality to achieve improved growth and profitability," said Mayer.

Yahoo also said it reached an agreement with Google providing Yahoo with additional flexibility to choose among suppliers of search results and ads. Google's offerings complement the search services provided by Microsoft, which remains a strong partner, as well as Yahoo's own search technologies and ad products.

Commenting on the Alibaba spinoff, Mayer said, "In addition to sharpening focus within core business growth, our top priority is the planned spinoff of Aabaco Holdings. This is an important moment for the Company, and we continue to strive to complete the spin as quickly as we can."

Yahoo's plan to spin off its stake in Alibaba Group Holding Ltd. (BABA) without incurring a tax bill. Last month, Yahoo disclosed the Internal Revenue Service denied its request for a favorable ruling of the plan.

YHOO closed Tuesday's trading at $32.83, down $0.67 or 2.00%, on the Nasdaq. The stock further dropped $0.29 or 0.88% in the after-hours trade.