Yahoo stock surges after CEO raises investors’ hopes

SAN FRANCISCO — Call her Yahoo Inc.'s cheerleader in chief.

In her first public remarks since taking over as the troubled Internet company’s chief executive three months ago, Marissa Mayer buoyed investors with her vision for a Yahoo comeback.

Yahoo shares started surging as Mayer spoke to analysts about the company’s better-than-expected third-quarter earnings and plans to reinvigorate the consumer Internet company. Yahoo rose 73 cents, or nearly 5%, to $16.50 in after-hours trading.

“I came to Yahoo to grow and help redefine one of the Internet’s most beloved companies,” the 37-year-old former Google Inc. executive said, adding “this job is tailor-made for me.”


Mayer, Yahoo’s fifth CEO in four years, said she would focus on improving the experience for users especially as more of them flock to mobile devices.

“The core components of Yahoo’s business — search, mail, ads, news and home page — are also the core products that I’ve built my career on,” she said.

And that’s what investors are banking on: Mayer’s track record at Google, which, more than any other Internet company, has profited from Yahoo’s decline.

They were also encouraged to see Yahoo’s net revenue inch up — a glimmer of hope that Yahoo is finally recovering from five long years of stagnation. While Internet rivals Google and Facebook Inc. have reaped the benefits of marketers spending more than ever on Internet and mobile advertising, Yahoo has for years lost ground and stature.

BGC Partners analyst Colin Gillis said investors exasperated by the company’s steady decline since it spurned a Microsoft Corp. takeover offer in 2008 understand the magnitude of the task ahead of Mayer and are willing to give her time to turn talk into action.

“This is the honeymoon period,” Gillis said. “It will take a year before any gnashing of the teeth begins. Most people don’t want to see another change.”

Yahoo earned $3.2 billion, or $2.64 a share, in the third quarter. Most of the profit came from a one-time gain of $2.8 billion for the sale of half its stake in Chinese Internet company Alibaba. Yahoo earned $293 million, or 23 cents a share, a year earlier. If not for Alibaba and a restructuring charge, Yahoo said it would have earned 35 cents a share. That surpassed analyst estimates of 26 cents a share.

Yahoo had net revenue — the amount it keeps after paying commissions to search partner Microsoft and other websites that run its ads — of $1.09 billion, slightly more than analysts expected.

Investors seemed to be paying more attention to Mayer’s words than Yahoo’s numbers. It was Mayer’s first earnings call since joining Yahoo over the summer.

Mayer did not provide much in the way of specifics, but she did say she wants Yahoo to become a “daily habit” for its 700 million users. She said she would work to improve Yahoo’s search engine, pour more resources into content for mobile devices and make sure the content and advertising on Yahoo’s website was more personalized and targeted. She also said she would target acquisitions, looking at deals of $100 million or less.

Mayer, who took just a two-week maternity leave after giving birth to a boy last month, said she has recruited a “dream team” of new managers.

She named Henrique de Castro, Google’s vice president of global partner business solutions, as chief operating officer. Last month, she hired Ken Goldman from network security company Fortinet Inc. to replace Tim Morse as chief financial officer. In August, Mayer added former American Eagle Outfitters Inc. executive Kathy Savitt to lead marketing efforts.

She also has sought to boost morale with free food and new iPhones or smartphones for Yahoo’s 12,000 employees. She said that Yahoo has already seen an improvement in the quality and quantity of job applicants.

“We believe Yahoo’s best days lie ahead,” Mayer said.