Yahoo Reports Drop in Quarterly Profit as Revenue Rises on Search

Yahoo reported Tuesday a 93 percent slide in quarterly profit from a year ago, while revenues rose modestly in disappointing quarterly results for the struggling Internet pioneer.

Net profit for the first quarter tumbled to $21.1 million from $312 million in the same period last year, amid what chief executive Marissa Mayer called "encouraging revenue growth" of eight percent.

Total revenue for the first three months of the year grew to $1.23 billion, led by gains in "search revenue," from ads linked to queries using Yahoo's search function.

But revenue and profit were both lower than Wall Street forecasts.

"Yahoo is amidst a multi-year transformation to return an iconic company to greatness," Mayer said in the earnings statement.

"This quarter, we saw encouraging revenue growth of eight percent, with display revenue growing a modest two percent and search growing 20 percent."

She said mobile revenues reached $234 million in the quarter, up 61 percent from a year ago.

The Internet giant will now focus on "accelerating" revenue growth "while managing our margins and costs," Mayer said.

She disclosed that Yahoo cut some 1,100 jobs in the past quarter, bringing the number of reductions to some 3,000 over the past three years.

Shareholder pressure
Yahoo has been under pressure from activist shareholders to deliver more value with lower costs and a narrower focus.

In the past quarter, expenses were sharply higher, due to increased product development spending, traffic acquisition costs and restructuring expenses.

But Mayer noted during the company's earnings call that "we are hard at work at monetizing our products to drive revenue."

The California group, which recently celebrated its 20th anniversary, has been undergoing a major reorganization since Mayer took the helm in 2012.

The efforts have included divestment of a large part of its stake in Chinese online giant Alibaba, along with a series of acquisitions.

Mayer spent more than $1 billion to acquire the blogging platform Tumblr to reach a younger market segment, and has made a push to focus more on mobile content and search.

Mayer said the company was looking at a way to "maximize value" of its stake in Yahoo Japan, believed to be worth several billion dollars.

But she said any change would come after "careful study."

In the past quarter, its search volume reached a five-year high, helped by a partnership with Mozilla, which made Yahoo the browser's default search engine.

The Mozilla agreement "is not only a high quality deal for us it is a profitable deal for us," Mayer said, adding that Yahoo "surpassed all expectations for new users and retention."

But Yahoo remains far behind search market leader Google, based on market surveys.

Yahoo and Microsoft last week updated their search partnership to allow more flexibility in searches and end Yahoo's exclusive sales force role with advertisers.