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Business

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Associated Press
Yahoo president and CEO Marissa Mayer speaks during a keynote address at the International Consumer Electronics Show in Las Vegas. Yahoo hopes to accelerate the growth it saw in the first quarter.

Yahoo to accelerate growth

Support from Alibaba will fade as it goes public

– Yahoo’s Marissa Mayer can’t rely on Alibaba Group Holding to bail her out much longer, putting the onus on her to accelerate a sales rebound that’s only getting started.

Last week, Alibaba posted a 66 percent sales surge and more than doubled its net income for the last quarter of 2013, showing a reacceleration of growth ahead of a potential U.S. initial public offering. The results helped send shares of Yahoo, which owns about 24 percent of the Chinese e-commerce company, soaring in extended trading as the Web portal also reported its first sales growth in more than a year.

While the developments were positive, Mayer, who became Yahoo’s chief executive officer in mid-2012, will soon lose much of Alibaba’s assistance. After the Chinese company goes public, investors who bought Yahoo’s shares as a proxy for Alibaba can directly purchase stock of the e-commerce provider. That means Mayer must push a turnaround in Yahoo’s core online-advertising businesses in order to gain the same investor accolades.

“They’re still in the early stages of turning the business around,” said Colin Gillis, an analyst at BGC Partners, who has the equivalent of a hold rating on the shares. “It’s been struggling to find growth.”

Yahoo said in a statement last week that its first-quarter sales, excluding revenue passed onto partner sites, were $1.09 billion, up from $1.07 billion a year earlier, in a sign that some of Mayer’s efforts to lure advertisers may be paying off. That compared with analysts’ average estimate of $1.08 billion, according to data compiled by Bloomberg. While revenue growth totaled less than 2 percent, the company’s sales had been flat or in decline since the last quarter of 2012.

Net income for the Sunnyvale, Calif., company was $311.6 million, down from $390.3 million a year earlier, partly because of restructuring charges. Profit, minus items such as stock-based compensation, was 38 cents a share, while analysts had projected 37 cents a share.

In one sign that Mayer is confident some growth will continue, Yahoo projected second-quarter revenue of $1.06 billion to $1.1 billion. That was in line with analysts’ average estimate of $1.08 billion and could be higher than the $1.07 billion that the company generated a year earlier.

Mayer said on a conference call that Yahoo has moved beyond sales decreases into a growth phase. She also said there is more work to do.

“We believe we have moved from our core business being in decline to a point of stable to modest growth,” she said. “Our modest success this quarter is an important start.”

Yahoo shares rose as much as 10 percent to as high as $37.70 in extended trading Tuesday. The stock is down 15 percent so far this year.

Sales increased in the first quarter as Yahoo’s major advertising services expanded, the company said. Display revenue, which includes graphical ads on the home page, rose 2 percent, while search-based marketing sales jumped 9 percent. The company also continues to pour money into the business.

Total operating expenses rose 16 percent to $1.1 billion during the quarter.

Yahoo is set to sell about 40 percent of its stake in Alibaba at the time of the company’s IPO and then can unload more shares later.

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