Yahoo shares fall after sales miss analysts’ estimates

YAHOO!, owner of the second most popular US internet search engine, has reported sales that missed analysts’ estimates as marketers devoted online ad spending to rival sites. The shares fell in late trading.

Excluding revenue passed on to partner sites, Yahoo had sales of $1.13 billion (€877 million), the company said yesterday. That compares with the average estimate of $1.16 billion among analysts surveyed by Bloomberg.

Yahoo is grappling with competition from companies such as Google and Facebook. Visitor time spent on Yahoo fell to 2 hours and 11 minutes in June, from 2 hours and 56 minutes in December, according to Nielsen.

“What they need are people staying up late, spending time on Yahoo,” said Heath Terry, an analyst at FBR Capital Markets in New York, who rates Yahoo shares “underperform”. “From all the numbers that we see, that’s just not happening.”

Yahoo fell 4.3% to $14.55 in after-hours trading, after rising 10 cents to $15.20 on Nasdaq. The shares have dropped 9.4% this year.

Second-quarter net income attributable to Yahoo rose to $213.3m, or 15c a share, from $141.4m, or 10c, a year earlier.

The company forecast revenue of $1.57bn to $1.65bn for the current quarter, compared with the $1.64bn estimate of Aaron Kessler, an analyst at ThinkEquity in San Francisco.

In the second quarter, search-based advertising sales declined 8% from a year earlier, after a 14% slide in the January-March period. Display ad revenue, including banner ads, rose 19%.

US online advertising is rebounding. The market should expand 11% this year after declining 3.4% last year, according to EMarketer in New York. Last week, Google reported a 24% increase in second-quarter profit, derived mostly from online ads.

Yahoo is bringing new content to its site to attract visitors and keep pace with rivals. The company’s US user base rose 10% in June from a year earlier, while Google’s climbed 14% and Facebook’s increased 84%, according to ComScore.

In May, Yahoo said it would feature social games on its home page from Zynga Game Network, whose properties include FarmVille and Mafia Wars. Zynga has more than 235 million active users.

Yahoo also has a deal with Facebook, owner of the world’s largest social-networking service, to integrate more content on Yahoo’s sites. As part of the agreement, Yahoo unveiled a program last month that will let users see updates from Facebook friends on its home page and e-mail service.