Yahoo Q2 Revenue Dips but Earnings Beat Estimates

Will put increased emphasis on video in upcoming quarters
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Yahoo's revenue dipped by 7% in the second quarter of 2013 to $1,135 million, as the company continues to struggle to turn around its advertising business.

But GAAP net earnings per diluted share rose 68% to 30 cents a share, up from 18 cents a year earlier and non-GAAP net earnings per diluted share rose 19% to 35 cents, generally beating analyst expectations.

Forbes and the Wall Street Journal reported that the consensus on Wall Street was for 30 cents before stock compensation and other expenses.

Non-GAAP revenue was also basically flat, down 1% to $1,071 million when traffic acquisition costs were excluded.

The stock was trading virtually flat, up 0.07% to $26.90 at 6:05 p.m. ET in aftermarket action.

The earnings results were notable because they marked the first year since CEO Marissa Mayer assumed the top post and were the first financial data released since the company's $1.1 billion acquisition of Tumblr.

CEO Marissa Mayer has made a number of acquisitions in the last 10 months but she stressed that it would take time for them to improve their business. "We don't believe Tumblr will provide meaningful revenue this year."

She also highlighted notable progress in ramping up product development and hiring of engineering talent. As part of their aggressive push into mobile, she said the mobile engineering teams had increased six fold to "hundreds" of people.

Yahoo now has over 340 million monthly mobile users, she noted as a result of those efforts.

While traffic had declined steadily in 2012, Mayer displayed graphics showing increases in traffic this year and explained that in June traffic had increased by up to the June 2012 levels, erasing last year's losses. She also cited increased traffic directly tied to a number of upgraded and improved products.

Looking forward, she stressed that the company would be putting renewed emphasis on search and video in addition to the push they've already made in mobile.

"You can expect us to make investments in video this year," she said.

"The thing that makes us very excited about video is that advertisers really like it," she explained later in the call. "It is something that translates really well from the format that they are used to. An advertisement can start on television, and jump to online and also ultimately be viewed on tablets and smart phones."

While Yahoo plans to do more original programming, she said the majority of new video on their platforms would come in from programming partnerships.

In the meantime, the company's largest businesses remained weak. Display advertising continued to fall, slipping 12% from a year earlier to $472 million in the second quarter of 2013.

GAAP search revenue declined by 9% to $418 million from a year earlier but search revenue excluding traffic acquisition costs rose by 5%.

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