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Yahoo Beats Analyst Estimates For Q3 Earnings, Shows Usage Increased After Data Breach Disclosure: Is The Company Going Strong Or Just Hiding The Cracks?

18 October 2016, 11:11 pm EDT By Aaron Mamiit Tech Times
Yahoo reported earnings of 20 cents per share in the third quarter, beating analyst estimates of 14 cents per share. Is the company going strong into the planned Verizon acquisition, or are there cracks that are being hidden?  ( Justin Sullivan | Getty Images )

Yahoo was expected by analysts to report earnings of 14 cents per share, not including certain expenses, for the third quarter, which is a drop compared with the 15 cents per share reported in the corresponding quarter last year.

The beleaguered Verizon acquisition target, however, posted earnings of 20 cents per share for the third quarter, with the good news coming at the best possible time as Yahoo seeks to push through with the deal with Verizon despite the recent data breach disclosures.

"Frankly, I look at the numbers, they're not that bad relative to what they could have been," said Ron Josey, an analyst for JMP Securities. "It should be somewhat more comforting to see that things aren't falling off a cliff."

Yahoo also showed that the recent disclosures on cybersecurity issues did not affect usage for its services through a series of charts. The data supposedly indicated that there was healthy traffic going through its websites, which had CEO Marissa Mayer saying in a statement that she was "heartened" by the loyalty of Yahoo users.

With all that said, it seems that Yahoo is still going strong and is primed to push through with the $4.8 billion deal to be purchased by Verizon. The telecommunications company was recently reported to be rethinking the transaction, as the massive email breach that affected at least 500 million Yahoo accounts may have a material impact on the acquisition. Yahoo's reported performance for the third quarter, especially after the disclosure of its cybersecurity issues, could put the acquisition back on track to completion.

However, underneath the higher-than-expected earnings and usage trends, there are several indications that the company is slowly cracking to the core. One thing that should be noted is that, while the charts that Yahoo used to report the increased user engagement showed either no drop-off or increase in usage after the data breach disclosure, they could be providing a skewed picture. The data could simply be showing Yahoo users visiting the company's websites to know more about the revealed hack, to find out if they were affected by it, and to secure their accounts.

In addition, the better-than-expected earnings for the third quarter were not fueled by a massive growth in Yahoo's business, but rather primarily through several cost cutting initiatives. EBITDA, arguably a better measure of a company's financial performance, was reported at $229.2 million, down from $244.2 million in the third quarter last year.

The management of Yahoo has also declined the usual conference call held every quarter with investors after the company released its earnings, which means that the questions surrounding the company will likely continue until the acquisition by Verizon is completed.

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