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15% drop in Yahoo revenues predicted for 2016

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April 7
1:28 AM 2016

Global internet company Yahoo Inc is expected to post 15 percent decline in revenues for the year 2016. Earnings are also predicted to tumble 20 percent this year. The financial prospects of Yahoo Inc are thinner than market forecasts. Meanwhile, the headcount is expected to ease by 1,500 to 9,000 in 2016.  

Referring to a Yahoo document, Re/code has said that revenues at Yahoo Inc may drop 15 percent and earnings too are expected to ease 20 percent for 2016. Disclosure documents are part of a book that Yahoo bankers gave to prospective buyers. However, a spokesperson at Yahoo Inc denied to comment on this latest development. 

Despite the drop in revenues and earnings, Reuters sees steady stock-based compensation. The headcount at Yahoo Inc may drop by 1,500 to 9,000 in 2016 from 10,500 in 2015. Financial conditions at Yahoo Inc are increasingly becoming dire. Revenues for 2016, backing out traffic acquisition costs, are expected to be of $3.5 billion, while earnings before depreciation, taxes and amortization are of $750 million.  

Earnings before depreciation, taxes and amortization (EBTA) are seen to be $750 million in 2016 from just below $1 billion in 2015 and $1.4 billion 2014. While expenses are also declining, it is not sufficient to offset the financial problem. Some analysts highlight the points from the Yahoo book that backing out traffic acquisitions costs (TAC) may drop from $4.1 billion in 2015 and $4.4 billion in 2014 to $3.5 billion in 2016. 

Re/code has received the book comprising disclosure documents that sellers give to buyers allowing them to prepare bids. Some opine that Yahoo book is a bit confusing and perhaps purposefully so. CEO Marissa Mayer is keen on the talent pool, preferring to give outsize share grants to get bright people onboard.

Referring to priority of retaining talented employees, Re/code's Kara Swisher said "That's double what it was only a few years previously and means CEO Marissa Mayer is loading up valued employees with outsize share grants to get them to stay."

Several possible buyers Re/code spoke to have expressed their views that the entire book is confounding. Yahoo seems to have shifted around everything in attempt to make it unclear. It's not easy to find what's making money and what's not. Yahoo book also doesn't give a clear picture about the performance of different departments. Yahoo Inc is looking for a potential buyer for its core business and the deadline for initial bids is on the 11th of April 2016, as reported by CNN Money.

Yahoo's financial prospects are considered to be dimmer than investors and market experts have anticipated earlier. It seems to be in a serious free fall, according to analysts. Yahoo, in February, started searching for a potential buyer for its core business. It is exploring ways to offload its core business including search, mail and news. 

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