Yahoo! Inc. (YHOO) Operates Like a Well-Run Hedge Fund

Yahoo! should be able to stick around

Yahoo! is in the business of buying companies and optimizing its pre-existing advertising business model. Marissa Mayer doesn’t plan on ruling the world with search or display-based advertising. What the company plans to do is leverage its intellectual property (primarily its Yahoo! Inc. (NASDAQ:YHOO) brand) and maximize the profit from its pre-existing businesses. After maximizing the amount of profit that can be made, the company plans to redirect the cash into an M&A business model.

Yahoo! is making some incremental market share gains against Google Inc (NASDAQ:GOOG) . In the latest ComScore report, Google has lost 0.6% of its market share against Yahoo! Inc. (NASDAQ:YHOO) and Bing!

Yahoo! Inc. (YHOO) Operates More Like a Hedge FundSource: ComScore

The loss in market share is attributable to Microsoft Corporation (NASDAQ:MSFT)’s recent advertising smear campaign:  “Don’t get Scroogled.” Basically, the full effects of Microsoft’s smear campaign are starting to take their toll on Google Inc (NASDAQ:GOOG). Microsoft Corporation (NASDAQ:MSFT)’s gain in the search-engine space is also due to Microsoft Corporation (NASDAQ:MSFT)’s Windows 8 lineup, which uses the Bing search engine exclusively. Every Windows computer comes pre-loaded with Windows Internet Explorer. Windows Internet Explorer uses Bing search by default, which is why Microsoft is making some steady gains in search.

Despite the gains in search-engine market share that both Microsoft Corporation (NASDAQ:MSFT) and Yahoo! Inc. (NASDAQ:YHOO) have been able to enjoy, it doesn’t change the fact that Google is leading in market share by a fairly large margin, with Google Inc (NASDAQ:GOOG) holding onto 66% of the United States market. Google reported 21% year-over-year growth in revenue in its latest quarterly earnings release along with a 15.8% gain in earnings. Therefore Google’s strong financial performance offsets the loss of market share.

Other upside catalysts include Google Inc (NASDAQ:GOOG)’s 400% gain in sales from its Android marketplace year-over-year due to having 70% of the global mobile market under its control. Google’s recent roll-out of Google Fiber could be an even greater contributor to the company’s revenue stream going forward. Wearable computing could take-off in the coming decade, becoming a multi-billion-dollar industry. Google remains a healthy company despite losing market share.

Conclusion

Yahoo! Inc. (NASDAQ:YHOO) resembles a well-run hedge fund. The current CEO continues to emphasize an M&A business model. This involves cutting costs, buying businesses, and gradually improving its search and media services. The company’s current strategy seems to be effective at generating revenue and net income growth.

The article Yahoo! Operates More Like a Hedge Fund originally appeared on Fool.com.

Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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