19
2006
Yahoo’s earning report came in yesterday and the stock is down to $25.12 right now (12:00pm PST). Ouch. Even though i quit yahoo in march, a substantial portion of my networth is still in yahoo shares. 22% cut in yahoo shares hurts pretty badly. 
The reality is that the numbers weren’t all that bad. The earnings met expectations at 0.11$/share and the revenues were slightly lower than consensus (1.123 B vs 1.14B). The short fall in revenue is 17 million dollars. That shortfall in revenue triggered a loss of ~10B in market capitalization for yahoo. I suppose that loss of 10B in market cap had more to do with the announcement about delays in the Panama project. Even here the delays announced were not really bad. It’s not like windows vista which got delayed by years. All they said was that this product is in QA and it will take atmost another quarter.
While there can be ton of speculation on whether or not this sell off is justified, the conclusion that can be drawn is that investors are not comfortable with yahoo’s growth propects and ability to deliver on the story as promised.
What does this mean for yahoo!? I believe this stock drop is going to force yahoo to find partners. The extensive partnership with ebay is perhaps on everyone’s mind and ebay might be a strong partner. I wonder who is a better partner ebay, microsoft or aol?
UPDATE: No, I don’t believe this represents a buying opportunity. I would wait until something concrete emerges. For example, a merger/acquisition/partership or release of panama and panama becoming a killer product or even some other killer product.
3 Comments until now
On July 19th, 2006
Evan Said:
By the time something concrete emerges, the market will have priced in the upside.
Predicting at least 50% reclimb in the next 4 weeks.
On July 26th, 2006
Ravi’s Blog » Blog Archive » It’s amazon’s turn Said:
[...] Is this an opportunity to buy? Yahoo has been up 10% in the last week after that horrendous drop. Will amazon do the same? I doubt it. Yahoo has a book value of 6$/share. Apart from this book value they have stake in yahoo! japan and alibaba.com (china). We can put an intrinsic value of the stock at 12-13$. So we would have been paying 13$ for yahoo’s US business. Sounds cheap doesn’t it? So, i can see some justification in a lot of value guys picking up yahoo!. [...]
On July 29th, 2006
Garam Chai Said:
I don’t think delay in Panama Project alone caused the drop. Even if Panama Project was on schedule, it woudn’t make a dent in reality/perception that Google’s got the best search engine…and relevance of ads displayed. If my friends and I (and lots and lots of folks like us) don’t use Yahoo!’s search, because we believe Google is the best (and we don’t see why we shoul d start using Yahoo! search when we’re happy with the results coming from Google search), number of folks using Yahoo! search won’t increase. Unless this number increases, revenue from ads—with or without Panama—will not increase. What hurt the stock was outlook for future quarters/years. Maybe the outlook for non-search related revenue is also not good?
Regarding Vista getting pushed out by years, any number of delays is worth the wait (for Microsoft and users) if it can exceed the staibility Windows XP currently provides. If vista is even more stable, offers more eye candy, comes with (some) security, etc. it will do well for Microsoft. Of course, they will follow Vista with a bunch of apps using services provided by Vista. I am not too sure if Panama Project can be compared with Vista.
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