Yahoo Shares Defy Plunge After Mayer Sets Mobile Focus

Shares of Yahoo (Nasdaq: YHOO), the No. 3 search engine, rose as much as 6 percent despite Tuesday’s market plunge after new CEO Marissa Mayer said she was optimistic the company would succeed in the mobile sector and attract new customers.

As well, with $9.4 billion in cash, mostly from last month’s sale of an investment in China’s online Alibaba Group, Mayer and new CFO Ken Goldman suggested the Sunnyvale, Calif., search and media giant will mount a share buyback soon.

At the close, Yahoo shares were at $16.67, up 90 cents, after setting a 52-week high of $16.79 earlier, as the S&P 500 Index fell about 1.4 percent to 1,413.11.

After Monday’s close, Yahoo reported third-quarter net income jumped to $3.16 million, or $2.64 per share, compared with prior-year net income of $293.2 million, or 23 cents per share, on flat revenue of $1.05 billion.

Yahoo received net proceeds of $7.6 billion from Alibaba, including $6.3 billion in cash, $800 million in preferred shares and $550 million for licenses.

Mayer reiterated the company’s plans to pass on at least $3.65 billion in after-tax proceeds to shareholders. That was a key point of Third Point Capital, the New York-based hedge fund whose principal, Daniel Loeb, is now a Yahoo director, who had previously argued Yahoo had many undervalued assets.

Mayer, 37, in her first call with analysts since joining the company from Google (Nasdaq: GOOG), the No. 1 search engine, on July 16, said she wanted to pay more attention to the mobile sector because more searching is coming from it. So are eyeballs to read display advertisements.

“Mobile represents not only a daily habit but a fundamental and massive platform shift,” she said, “a platform shift that we have to ride and participate in, in order to be relevant.”

Yahoo won’t devise its own mobile OS, Mayer said. “We would like to offer our products on iOS as well as on Android.”

The new boss said Yahoo can upgrade its popular sites like Yahoo News and Yahoo Sports, add services and deepen search to better compete with Google, which dominates the sector. She said while Microsoft (Nasdaq: MSFT), the world's biggest software company, controls much of Yahoo’s search under terms of a deal struck by her predecessors, Yahoo wants to try new approaches.

Indeed, search-ad revenue rose 11 percent in the third quarter, compared with only 4 percent in the second quarter and 8 percent in the first quarter, in part because Microsoft has a “guarantee payment” system from searches on its own Bing service or Yahoo.

Analysts who talked to Mayer were pleased.

Susquenhanna Financial’s Herman Leung upgraded the shares to “positive” from “neutral” with a price target of $20.

At Jefferies, analyst Brian Pitz said he was “generally impressed with the initial direction” Mayer propounded but cautioned “it’s still a little too early to tell” how she will implement it.

Pitz retained his “hold” rating on Yahoo, with a price target of $18.

Meanwhile, Mayer, who gave birth to her first child, a son, on Sept. 30 and took a brief maternity leave, didn't mention it and wasn't asked any personal questions on the call.

"My first nearly 100 days have been energizing and, honestly, a lot of fun," the CEO said.

Mayer is among a handful of women at the helm of technology companies, including Margaret Whitman at Hewlett-Packard Co. (NYSE: HPQ), Virginia Rometty at International Business Machines Corp. (NYSE: IBM) and Stephanie DiMarco at Advent Software Inc. (Nasdaq: ADVT).