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Internet giant Yahoo started its Korean venture way back in 1997. It is exiting after 15 years and firing 200 of its South Korean employees in the process. South Korea is the first of the Asian markets from where Yahoo is retreating.
Yahoo has been actively restructuring its operations over the past year. It has already decided to shut down its music service in China on January 20, 2013. Further, it has been disposing its assets in China and selling part of its share in Alibaba for $7.6 billion with the intention of using the proceeds to acquire new companies.
Google Inc. (GOOG - Analyst Report) also appears to be withdrawing from China going by the fact that it has closed down both its shopping search and Music Search services in country. The Taiwanese handset maker HTC is also closing its business in South Korea as it is facing stiff competition from local handset makers like Samsung and LG.
Yahoo started strongly in South Korea, but gradually lost position to local South Korean players such as Daum Communications Corp, NHN Corp and SK Communications Co. As a result, its market share fell to a mere 2-3%, whereas NHN’s Naver (search engine) commanded 80%.
Thus, the strategy adopted by the new CEO Marissa Mayer makes sense. Yahoo’s resources can be put to good use now, i.e., to invest in markets such as Singapore, Malaysia, Hong Kong and Taiwan, where the Yahoo brand is better valued.
In the third quarter of fiscal 2012, Yahoo reported revenue of $1.20 billion, which was down 1.3% sequentially and 1.2% year over year. TAC costs were down 17.7% sequentially and 22.2% from last year. Excluding these costs in all periods, net revenue was essentially flat on a sequential basis and up 1.6% from last year, in line with the consensus estimate.
Yahoo has a Zacks #2 Rank, which implies a Buy rating while Google has a Zacks #3 Rank, implying a Hold rating in the near term.
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