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Yahoo sees profits rise after last year's restructuring costs

Spending spree cuts cash reserve in half
Wed Jul 17 2013, 13:23
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WEB PORTAL Yahoo announced a seven percent drop in second quarter 2013 revenues to $1.1bn but saw profits increase by 150 percent to $137m thanks to lower costs.

Yahoo has been on a spending spree to improve its revenue generation as it tries to compete with AOL, Facebook, Google and Microsoft. The firm announced that its second quarter profits rose to $137m, but despite all its purchases revenue fell by seven percent to $1.1bn.

Yahoo's seemingly impressive 150 percent increase in second quarter profits was due to the previous year's second quarter being hit by significant restructuring costs. Taking out the firm's restructuring costs last year more than makes up for the jump in profits.

However Yahoo's falling revenue and $1.1bn cash pile, almost half of what it was at this point in 2012, will be a worry for investors. Yahoo CEO Marissa Mayer has courted the press well and helped the firm's share price to soar despite not revealing how the firm will compete with Google for advertising dollars.

Mayer said, "I'm encouraged by Yahoo!'s performance in the second quarter. Our business saw continued stability, and we launched more products than ever before, introducing a significant new product almost every week."

While Mayer's scattergun approach to product releases might help Yahoo garner more column inches in the press, there is no guarantee that it will help the firm generate cash flow.

The problem Mayer faces is that she can only reduce costs so far to boost profits before the lack of a clear, coherent strategy will show up on the income statement. µ

 

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