|
New York: Yahoo! Inc. chief executive officer Jerry Yang's plan to boost sales by offering services for phones and social-networking sites may founder from a lack of money.
The owner of the most visited US website is forecast by analysts to report an eighth straight quarter of declining profit. The Sunnyvale, California-based company is generating 49 cents a share of non-budgeted cash, compared with $5.57 for Google Inc., the world's largest internet search engine.
Yahoo's investments in online advertising, which accounts for most of the $6.5 billion in annual sales, have failed to stem market share losses to Google. Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York, said Yang's financing options for acquisitions and technology spending are limited, giving Google an edge as the companies move into mobile-phone advertising, social networking and web video.
"It's putting Yahoo at greater risk of irrelevance," Lindsay said. He recommends adding Google shares and holding onto Yahoo's stock. Yahoo "just isn't generating anything like the resources they need to really stay in the game," Lindsay said.
Fourth-quarter net income at Yahoo probably fell 42 per cent to $155.8 million, or 11 cents a share, according to the average of 22 analysts' estimates in a Bloomberg survey. The company may also announce about 700 job cuts, five per cent of the staff, a person with knowledge of the plans said last week.
Google will probably post a 21 per cent increase in profit to $1.25 billion, or $3.90 a share, when it reports results tomorrow, the survey showed.
Strategy
Yahoo spokeswoman Diana Wong declined to comment. Google spokesman Jon Murchinson said his company would "continue to invest in search and ads", without commenting on the quarter's results.
Yahoo is struggling relative to Google because of a failure to invest in "cutting-edge" technologies in past years, said Robert Peck, an analyst at Bear Stearns Cos. in New York, who advises buying shares of both.
Yang, who replaced Terry Semel as CEO in June, also faces challenges to win sales from social-networking sites Facebook Inc. and News Corp's My-Space.
While Yahoo made acquisitions to build its so-called display business - including paying $680 million to buy the remaining stake in Right Media Inc. and $300 million for BlueLithium Inc. - Google has sought bigger deals. Mountain View, California-based Google paid $1.65 billion for video site YouTube Inc. and is buying the online advertising firm DoubleClick Inc. for $3.1 billion.
Google had $13.1 billion in cash, cash equivalents and marketable securities at the end of September, compared with $2.8 billion for Yahoo. Google had $1.63 billion in cash flow from operations in the third quarter, versus Yahoo's $457 million.
|
