This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Yahoo!, Investors Brace for Earnings Report

NEW YORK (TheStreet) -- Investors will be watching Yahoo!'s (YHOO) third-quarter earnings announcement closely Tuesday, as rumors swirl about a buyout from AOL (AOL) and uncertainty over the future of CEO Carol Bartz.

Analysts are estimating EPS of 15 cents, up from 13 cents in the same period last year. Revenue is expected to stay flat at $1.13 billion.

Yahoo

After Bartz was hired two years ago to turn around the search giant following a failed takeover attempt from Microsoft (MSFT), some tech watchers have questioned her ability to achieve meaningful results. Yahoo's market cap currently hovers at around $21.7 billion, far lower than Microsoft's $44.5 billion bid.

The company also lags behind competitors in the U.S. search market. According to a recent report from ComScore, while Google (GOOG) and Microsoft's Bing increased their share last month, Yahoo's slice declined from 17.4% in August to 16.7% in September.

Also troubling is that within the past month, several key Yahoo! execs have announced their departures, including U.S. operating chief Hilary Schneider. Investors will be keen to hear plans of a replacement for Schneider, as the company's North American segment comprises over 70% of its overall business.

Perceived weakness at Yahoo! culminated last week after reports surfaced that AOL and a group of private equity firms were eying a takeover of the Sunnyvale, Calif.-based company, Bloomberg reported. Talks are in the preliminary stages, and the complex nature of the transaction -- which would likely include unloading Yahoo's 40% stake in Chinese Internet company Alibaba and Yahoo! Japan -- could make a deal difficult to achieve. A reverse merger which would also require Yahoo! selling its Asian assets was proposed, as well.

Some analysts believe Tuesday's earnings announcement will force management to revaluate Bartz's performance.

"I think that Carol will get a few more quarters, but she is under pressure," said Yun Kim, an analyst at Gleacher & Company. "Carol came in 20 months ago and has yet to show she can turn this thing around. It's time to closely examine her track record at Yahoo!"

Last quarter, Yahoo! posted a year-over-year decline in its North American business, despite improvement among peers. "Frustration got to the next level with last quarter's results," Kim said. "It was a wake-up call for investors to get this thing going quickly if it's ever going to improve."

Ironfire Capital's Eric Jackson, a contributor to TheStreet and an activist investor who pushed for Yahoo! to accept Microsoft's acquistion bid, said Bartz has been "a big failure" for shareholders.

"Two years after Bartz's arrival, Yahoo! is less relevant than it was before," he said. However, Yahoo!'s board of directors is unlikely to force Bartz out, Jackson said, as the company would still be required to pay out her contract for the remaining two years.

Jackson calls Bartz -- who eliminated 5% of her staff and froze salaries shortly after becoming CEO -- "a pure cost cutter who can't answer the question 'what is Yahoo?'"

Jackson has a short position in Yahoo!

Yahoo!'s stock has declined over 5% since last year, compared to Google's 11% gain over the same period. Yahoo! shares were down 16 cents to $15.77 in midday trading Tuesday.

--Written by Olivia Oran in New York.



>To follow the writer on Twitter, go to http://twitter.com/ozoran.

>To submit a news tip, send an email to: tips@thestreet.com.

Stock quotes in this article: YHOO, GOOG, MSFT 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,363.84 +101.28 0.62%
S&P 500 1,850.11 +7.13 0.39%
NASDAQ 4,051.51 +17.3490 0.43%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs