Internet media company Yahoo! Inc. (YHOO) is scheduled to report first-quarter earnings after the market closes Tuesday.
The company, which continues to lose Internet search market share to Google Inc. (GOOG), anticipates lower revenues for the quarter. However, revenue from online billboards, also known as display advertising, is widely expected to be stronger than expected.
The revenue pressure is expected to be mitigated by effective cost control, which rival Google could not demonstrate.
On average, 27 analysts polled by Thomson Reuters expect Yahoo to have earned $0.16 per share in the quarter, which is lower than $0.22 per share earned in the same period last year.
For the first quarter of 2011, Sunnyvale, California-based Yahoo anticipates revenue of $1.15 billion to $1.23 billion, and revenue, excluding traffic acquisition costs, of $1.02 billion to $1.08 billion. The guidance is better than analysts' revenue projections of $1.06 billion.
Microsoft's revenue share in the first quarter, from an existing search partnership with Yahoo, is expected to be approximately $36 million.
In the immediately preceding fourth quarter, Yahoo's adjusted net income was $0.26 per share on revenues of $1.53 billion. In the quarter, profit doubled from last year, due to better cost controls, while revenue declined 12 percent, as the digital media firm continues to struggle hard amid tough competition in the online-advertising.
Yahoo, which offers most of its products free, requires more of ad revenues to boost its performance. Even though display advertising is a bright spot, the company is facing tough competition in search from Google and also from increasing popularity for social networking sites such as Facebook.
The company's larger rival Google last week reported a 17 percent growth in first-quarter profit, driven mostly by ad revenues. Quarterly earnings per share, however, failed to meet Street expectations, as its expenses grew 35 percent, with recent salary hikes and increased job openings, adding fuel to the growing concern of investors about mounting costs.
According to comScore Inc.'s (SCOR) monthly qSearch analysis of the U.S. search marketplace, Google Sites led the explicit core search market in March with 65.7 percent of search queries conducted, while Yahoo trailed behind with 17.7 percent. Google's share rose 0.3 percentage points from the month of February, while Yahoo lost 0.4 percentage points. Meanwhile, Microsoft gained 0.3 points to reach 13.9 percent of searches.
As part of Yahoo CEO Carol Bartz's turnaround strategy, the company has been going through best cost control efforts, including laying off hundreds of workers and closing or selling several of its less popular services.
In early March, media had reported that Yahoo is considering to offload its 35 percent stake, worth about $7 billion, in Yahoo Japan, which has over one billion page views per day and is Japan's biggest search engine. It is also believed that after Yahoo pulls out of Japan, it may also exit its around 40 percent stake in Chinese e-commerce firm Alibaba.
As per reports, a sale of these stakes could raise billions of dollars for the company, with which it could buy a good startup to boost its results.
YHOO closed Monday's regular trading session at $16.34, down $0.28 or 1.65 percent. In pre-market activity, shares increased $0.01 or 0.03 percent to $16.35.
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