Yahoo looks to boost value of Japan unit

Yahoo has appointed advisers to explore ways of maximising the value of its stake in Yahoo Japan, sending its shares higher in after-hours trading on Tuesday despite disappointing first-quarter earnings.

Marissa Mayer, Yahoo chief executive, addressed a push by Starboard Value, an activist shareholder, for the internet company to spin off the 35.5 per cent stake which is valued at about $9bn.

Ms Mayer said Yahoo had hired advisers "to determine the most promising opportunities to maximise the value and the options of Yahoo Japan" which had been left out of the plans to spin off the company's $30bn-plus Alibaba stake by the end of this year.

But she said it would require "careful study" to figure out the best option for the almost 20-year-old cross-border joint venture, which it owns with SoftBank.

Yahoo shares gained 0.8 per cent to $44.85 during the conference call on Tuesday, after previously falling when the earnings missed analyst expectations. In Tokyo on Wednesday morning, shares in Yahoo Japan were up 1.7 per cent.

The Silicon Valley company reported non-GAAP earnings per share of 15 cents, lower than the average analyst estimate of 18 cents. Net income was $87m on a GAAP basis.

Yahoo's revenue decline, which it has been trying to reverse, continued in the first three months of the year. Wall Street's preferred measure of revenue, which excludes traffic acquisition costs, was $1.04bn, below the consensus forecast for $1.06bn and down 5 per cent from $1.09bn for the same period of 2014.

Ms Mayer said Yahoo was in the middle of a "multiyear transformation to return an iconic company to greatness".

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She stressed that total revenue - up 8 per cent at $1.2bn - had risen faster than the metric on which analysts focus, driven by an increase in gross search revenue of 20 per cent quarter on quarter.

The so-called MAVENS growth businesses of mobile, video, native advertising and social media, contributed a third of traffic-driven revenue for the first quarter, up from 22 per cent for the same period in 2014.

Yahoo forecast GAAP revenue of between $1.2bn and $1.25bn and adjusted earnings before interest, tax, depreciation and amortisation of $240m to $260m, for the second quarter.

"For the next phase of the transformation, we will focus on accelerating our GAAP revenue growth while managing our margins and costs," Ms Mayer said.

The earnings come after Yahoo renegotiated its search deal with Microsoft's Bing, freeing it up to push further into search, an area Ms Mayer knows well from her previous senior roles at Google.

"We do deeply believe in search. Search is deep in Yahoo's DNA since the start of the company," Ms Mayer said, adding that she was particularly interested in mobile search and new areas such as the anticipatory search products Cortana, Siri and Google Now.

The new deal means Yahoo only has to send the majority of its traffic to Bing, leaving it with up to 49 per cent of the traffic to direct to its own search results using its own technology or to send to another partner, perhaps even Google. Microsoft now gets to own the sales relationships with premium advertisers.

Yahoo said a new search partnership with Mozilla had prompted an increase in search volume in the first quarter of 2015, with the number of searches hitting a five-year high. The deal, announced in November as Yahoo's "most significant partnership" in the past five years, saw Yahoo replace Google as the default search engine in the US for the Firefox web browser.

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