What Yahoo! Inc. (YHOO) Needs To Do After a Weak 2Q

On CNBC, experts on Squawk on the Street put Yahoo! Inc. (NASDAQ:YHOO)’s weak second quarter into perspective and offered free advice on what the company’s management needs to do now that performance figures are not improving as fast as expected.

Yahoo! Inc. (NASDAQ:YHOO)

Believe it or not, Jim Cramer and the other experts on Squawk on the Street believe that Yahoo still needs to make more acquisitions in spite of the fact the company has already made a string of acquisitions since hiring Marissa Mayer as its chief executive officer about two years ago.

Yahoo! Inc. (NASDAQ:YHOO) reported earnings per share of 37 cents on revenue of $1.04 billion. The experts said the earnings missed Wall Street expectation by a penny. Although Yahoo delivered 2Q performance that didn’t even satisfy the management itself, Mayer said the company can and will be able to do better in the future.

Quoted on Squawk on the Street, from a convergence call with investors and analysts after the 2Q release, Mayer remarked:

“In the case of Yahoo! I stated in the past we believe a transformation of this size and scale takes multiple years, and we continue to believe that’s the case today. Even so, given our long term sustainable growth, we are not satisfied with the results this past quarter.”

With the 2Q results being unsatisfying, Mr. Cramer offered an advice: “Going premium content, expensive to produce, and they are not able to monetize it. This is not a growth company. They need to take the Alibaba money and do a terrific acquisition.”

Yahoo! Inc. (NASDAQ:YHOO) has already made numerous acquisitions to the point that it recently launched new products and even announced retirement of aging ones.

As for Alibaba, a Chinese online retailer, Yahoo! owns about 24 percent stake in the company and it is expected to sell nearly 12 percent of its stake in the upcoming Alibaba IPO. Mr. Cramer’s observation that Yahoo! Inc. (NASDAQ:YHOO) should use the IPO funds to make more acquisitions resonates well with the view in Wall Street where several analysts have recommended the same, especially acquisitions that would help the company increase user-engagement and monetization.


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