Yahoo To Spin Off Alibaba Stake, Reports Earnings

Yahoo Tuesday announced a plan for a tax-free spinoff of the company's remaining holdings in Alibaba Group into a newly formed independent registered investment company, SpinCo. The stock of the new company will be distributed pro rata to Yahoo shareholders, resulting in SpinCo becoming a separate publicly traded company. Along with the spinoff, Yahoo announced earnings. Search advertising performed better than many expected.

Following the spinoff, Yahoo will continue to operate its core business and hold its 35.5% interest in Yahoo Japan. SpinCo will own all of Yahoo's remaining 384 million shares of Alibaba, valued at $40 billion based on the closing price on January 26, 2015, as well as a legacy, ancillary Yahoo business. SpinCo will assume no debt in the transaction, and Yahoo will retain its cash.

The company also reported fourth-quarter 2014 profits per share of 30 cents, exceeding analysts' expectations by $0.01. Excluding traffic acquisition costs, revenue came in at $1.179 billion; Wall Street wanted to see $1.186 billion.

GAAP search revenue came in at $467 million for Q4 2014, up 1% compared with the fourth quarter of 2013. GAAP search revenue was nearly $1.8 billion for the full year of 2014, up 3% compared with $1.7 billion for the prior year. Gross search revenue came in at $932 million for the fourth quarter of 2014, up 14% compared with the fourth quarter of 2013. Gross search revenue was $3.38 billion for 2014, up 14% compared to the prior year. Gross search revenue was not previously reported in prior years.

Along with an uptick in gross search revenue, the price-per-click rose 7% and the number of paid clicks rose 10% in Q4 2014 compared with the year-ago quarter. Mobile revenue for the fourth quarter and full year of 2014 was approximately $413 million and $1.26 billion, respectively.

eMarketer calls Yahoo's mobile advertising growth "a bright spot" in a struggling business. In the U.S., the company took 3.2% of the $18.75 billion mobile ad market in 2014, per eMarketer, and is expected to see the largest share increase among the top U.S. mobile ad selling companies between now and 2016.

GAAP display revenue fell 4% to $532 million for the fourth quarter of 2014, compared with the year-ago quarter. GAAP display revenue was $1,868 million for the full year of 2014, a 4% decline compared with nearly $2 billion for the prior year.

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