Yahoo’s 1Q disappoints; CEO vows to cut costs

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SAN FRANCISCO — Yahoo is still struggling to boost revenue nearly three years into CEO Marissa Mayer’s tenure, magnifying concerns that the Internet company holds little value beyond its lucrative Asian investments.

The latest evidence of Yahoo’s financial malaise emerged Tuesday with the release of the company’s first-quarter earnings report. Mayer and Yahoo’s chief financial officer, Ken Goldman, eased investors’ disappointment by pledging to cut costs, while indicating that the company may be willing to fulfill Wall Street’s desire for a spinoff of its stake in Yahoo Japan.

Investors already had driven down the company’s stock by 12 percent so far this year before Tuesday’s numbers came out. The shares initially fell by an additional 2 percent in extended trading, but then rebounded after the cost-cutting pledge and the Yahoo Japan remarks. If that happens, it would mirror what Mayer has started to do with an even more valuable stake in Alibaba Group, an e-commerce star in China.

Yahoo’s stock rose 66 cents to $45.15 after Mayer’s remarks in a webcast reviewing the financial results.

After accounting for ad commissions, Yahoo’s first-quarter revenue fell 4 percent from the same time last year to $1.04 billion, extending a troubling trend that began before Mayer took over in July 2012. Yahoo’s net revenue has declined from the previous year in seven of the past nine quarters. The only uptick reflected mere 1 percent increase in revenue.

Yahoo’s overall first-quarter revenue, before ad commissions, didn’t impress investors because they focus on the amount of money that the company retains after paying its partners for helping to draw online traffic to it ads.

Those expenses, known as “traffic acquisition costs,” quadrupled from the same time last year, an indication that Yahoo is paying a steep price to show its advertising.

The Sunnyvale, Calif., company also poured substantially more money into developing new products, contributing to a steep drop in Yahoo’s first-quarter earnings.

Although Yahoo’s stock has nearly tripled under Mayer’s leadership, most of the increase has been tied to Yahoo’s 24 percent stake in Alibaba Group and 35 percent stake in Yahoo Japan.