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Yahoo! Falls on Mixed Results, Weak Guidance (Update 1)

NEW YORK ( TheStreet) -- Yahoo! (YHOO - Get Report) shares fell following second-quarter earnings that beat Wall Street estimates, but missed on the top line.

The Sunnyvale, Calif.-based company reported earnings of 35 cents a share on $1.07 billion in revenue excluding traffic acquisition costs, as revenue fell 1% year-over-year. Display revenue ex-TAC came in at $423 million, down 11% year-over-year, while search revenue ex-TAC was $403 million, a year-over-year increase of 5%.

On the conference call, CEO Marissa Mayer said there is a "chain reaction to growth - people, then products, then traffic, then revenue." She also noted that "pageview traffic achieved crossover in early June, and has grown year-over-year."

Analysts polled by Thomson Reuters expected Yahoo! to earn 38 cents a share on sales of $1.074 billion. Analysts surveyed by Estimize were looking for 34 cents a share on $1.09 billion in revenue.

"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," Mayer said in the press release. "From the new Yahoo! News, the new Yahoo! Sports app, the redesigned Yahoo! search, the new Flickr, the new Yahoo! Mail for tablet, the Yahoo! Weather app, our new Yahoo! app with Summly - this quarter drove tremendous improvements in our product line and our users responded with increased usage and engagement."

On the call, Mayer said that she wants to see search become a bigger part of the business faster, and is taking the steps to help turn this segment of the business around. She noted that Yahoo!'s focus and future is on mobile, where the company has over 340 million mobile users.

The company ended the quarter with $4.8 billion in cash and investments, down from $6 billion at the end of 2012. There is $1.9 billion left on an existing $5 billion buyback program.

Yahoo! gave third-quarter guidance that was softer than what the market was expecting. For the third quarter, Yahoo! expects revenue excluding TAC to be between $1.06 billion and $1.1 billion. Analysts surveyed are expecting $1.12 billion.

The Mayer-led Yahoo! also cut fiscal 2013 estimates for Non-GAAP operating income. It now expects operating income to be between $900 million and $1 billion, down from a range of $1.05 billion to $1.1 billion. Full year revenue guidance was pared between $4.45 billion and $4.55 billion.

Shares of Yahoo! closed the session lower, off 1.68% to wind up at $26.88. The stock is moving lower in extended-hours trading, down 1.41% to $26.50 according to Nasdaq.com.

-- Written by Chris Ciaccia in New York

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