The battle among search engines seems to have ended a long time ago with Google Inc (NASDAQ:GOOG) on top. The collaborations between Microsoft Corporation (NASDAQ:MSFT) and Yahoo! Inc. (NASDAQ:YHOO)! with their respective search engines and ad network doesn’t seem to help them regain their former market share in the search engine arena. So doesn’t this mean it’s all over for Yahoo and Microsoft? Is Google Inc (NASDAQ:GOOG)’s dominance permanent?
Despite the little growth in Yahoo’s revenue during 2012, the company’s stock rallied during last year by nearly 23%. In comparison, Google Inc (NASDAQ:GOOG)’s stock rose by only 9.5% and Microsoft remained nearly unchanged with a 2.9% bump. This might indicate that Yahoo has regained some of its investors’s confidence back. Yahoo’s management is trying to lead the company into a new direction.
In 2012, Yahoo sold a large portion of its stake in Chinese e-commerce Alibaba Group for $7.1 billion. This decision has lead to a sharp rise in the company’s cash flow. According to the company’s cash flow report, the net gain from this sale was $6.2 billion. These funds open up new frontiers for Yahoo. The company has already used some of these funds to augment its repurchase program of its stock to nearly $2.2 billion in 2012. The rise in cash might lead to a higher repurchase program or dividend payment and will keep the company’s stock from falling. This could also lead Yahoo to raise its R&D expenses.
R&D is a key factor that could imply the potential future growth of a company. During last year, Google Inc (NASDAQ:GOOG)’s R&D provision rose by 32% while Yahoo’s R&D expense fell by 4%. Nonetheless, in terms of R&D out total revenues, Yahoo’s ratio reached 18% while Google’s ratio was only 13.5%. In other words, a larger portion of Yahoo’s revenue goes to R&D compared to Google Inc (NASDAQ:GOOG). The recent added funds along with company’s new management might also lead to a rise in R&D or at least bring some new opportunities that will regenerate Yahoo.
Everyone is going mobile
For Microsoft, the recent release of Windows 8 might lead to growth in Bing’s revenues; this new OS might result in a rise in Microsoft’s platform in smart-phones and tablets. The sharp rise in Nokia’s sales of its Lumina Smart-phone indicates potential growth in Microsoft’s revenue not only from its OS, but also from using its platform and search engine. Yahoo is also trying to expand its mobile capabilities; e.g. the company has recently acquired a Video Chat Startup.