Yahoo posts flat first quarter revenue on declining display ad sales

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Yahoo Inc's first quarter revenue fell short of Wall Street targets and its display advertising business experienced declining sales for the second quarter in a row, sending the Internet company's shares down about 4 percent.

Yahoo's stock, which had surged more than 50 percent since Chief Executive Marissa Mayer took the helm in July, fell to $22.90 (14.9 pounds) in after-hours trading on Tuesday.

"People were disappointed by the display advertising because that's Yahoo's key business," said Sameet Sinha, an analyst at B. Riley Caris.

Yahoo also projected net revenue for the second quarter of $1.06 billion to $1.09 billion in a presentation posted on its website after its earnings release on Tuesday. That was below the average analyst expectation of $1.11 billion in second quarter net revenue, according to Thomson Reuters I/B/E/S.

Mayer, a former Google executive, is trying to revitalize Yahoo's business. While Yahoo was once among the Internet industry's most powerful companies, it has lost its appeal among consumers and advertisers to rivals such as Google Inc and Facebook Inc.

Mayer has said that building better online products that entice consumers to spend more time on Yahoo properties, and developing new services for smartphones and other mobile devices, are key to turning the company around.

Net revenue, which excludes fees shared with partner websites, was $1.07 billion in the first quarter, roughly flat from the year-ago period, according to Yahoo.

Yahoo's net revenue was at the low-end of the $1.07 billion to $1.1 billion it forecast in January, in what was the first financial outlook that Yahoo offered since Mayer became CEO. Analysts polled by Thomson Reuters I/B/E/S on average expected net revenue of $1.1 billion.

Yahoo said it earned $390 million, or 35 cents a share in the first three months of the year, compared to $286 million, or 23 cents in first quarter of 2012.

Revenue from display ads fell 11 percent year-on-year, excluding certain items. Search advertising revenue rose 6 percent year-on-year on an adjusted basis.

"We were looking for display to be down about 9 percent and they came in at negative 11," said Sinha, of B. Riley Caris.

(Reporting By Alexei Oreskovic with additional reporting by Malathie Nayak; Editing by Bernard Orr)