After early success, Yahoo's Mayer faces rising bar

Tue Jan 29, 2013 3:22pm EST
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By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Six months into her tenure, Yahoo Inc Chief Executive Marissa Mayer has arrested the decline of the Internet portal and has won favor on Wall Street with stock buybacks, but a longer-term turnaround remains uncertain.

Her promise on Tuesday of a modest revenue uptick in the coming year paled in comparison with the growth of its Internet peers. And Yahoo shares, which have gained roughly 30 percent since Mayer took the reins in July, fell nearly 3 percent to $19.77 on Tuesday.

"All in all it seems like they're off of life support," said Michael Binger, a senior portfolio manager at Gradient Investments. But "I still see it as kind of a second tier-search company, a good display company. I still struggle to see the new avenues of growth."

Mayer, 37, who was Google Inc's first female engineer, warned investors on Monday that fixing Yahoo was a long-term project. She outlined a plan to overhaul a dozen of Yahoo's top websites, with the goal of enticing users to spend more time on them and consequently boosting ad revenue through a "chain reaction" of growth.

For investors already satisfied with the stock's recent gains, waiting for Mayer's chain reaction may not be worth the time and risk.

"You can get to $20 with just share purchasing and selling Alibaba stake, basic execution and keeping costs low. Now to drive it further, you've got to fix the properties," said BGC Financial analyst Colin Gillis.

"The road gets a little harder," said Gillis.

The fact that Yahoo is competing against such dominant Web companies as Google, the world's No. 1 search engine, and social networking giant Facebook Inc, makes the challenge all the more daunting.   Continued...

Yahoo Inc Chief Executive Marissa Mayer attends the annual meeting of the World Economic Forum (WEF) in Davos January 25, 2013. REUTERS/Pascal Lauener