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Yahoo Digital Ad Dollars To Drop In 2016, As Facebook, Google Grow

Yahoo ( YHOO ) will see a major drop in its digital ad revenue this year, even as rivals Facebook ( FB ) and Alphabet ( GOOGL ) unit Google watch their share grow, according to eMarketer’s latest ad spending forecast, released Wednesday. Yahoo’s worldwide net digital ad revenues will fall nearly 14% to $2.83 billion this year. That will cut Yahoo’s share of the overall digital ad market to 1.5% from 2.1% last year, eMarketer said. Both search and display ad revenue for Yahoo will drop by double-digit percentages in 2016, says the forecast. The Web portal’s display business will shrink to $1.41 billion, down 15.1% year over year, while its search business will decline 12.7% to $1.41 billion. Google, which dominates the global digital ad market, will see its net ad revenue rise 9% this year, while Facebook’s net ad revenue will jump 31%, says the report. “As Yahoo trims down its legacy business to focus on its so-called ‘Mavens’ (mobile, video, native ads and social businesses), we expect the company to shrink in size relative to its competitors,” said eMarketer analyst Martin Utreras. “A leaner Yahoo, more focused on its core growing segments, will still face stiff competition in an ever more crowded and sophisticated market.” The one area of growth for Yahoo is mobile, said eMarketer. Worldwide, Yahoo’s mobile ad business will grow 24.5% this year to $1.31 billion. Yet with rivals Google and Facebook poised to grow by even larger percentages, Yahoo’s share of the mobile market will shrink to 1.3% from 1.5%. Besides Facebook and Alphabet, Sunnyvale, Calif.-based Yahoo faced ad competition from companies such as  Netflix ( NFLX ), Snapchat and Pinterest. Yahoo CEO Marissa Mayer is under fire from investors who are inpatient for profits and want to oust her from her job. The company has hired three investment banking firms to evaluate potential bids for the sale of its core Internet operations. The company has said it is looking at its strategic options and has been cutting costs, including laying off 15% of its staff and closing several offices overseas. Mayer’s turnaround plan for the company includes continued investment in “Mavens.” Rosenblatt Securities said on Monday that Yahoo could be facing a “take-under” — a buyout price lower than market value — from any of a number of private equity firms that might then dismantle the company. Much of Yahoo’s value comes from its holdings in China e-commerce giant Alibaba Group ( BABA ). Yahoo stock has fallen nearly 25% over the past year amid concerns about the company’s poor financial showing and its future prospects for growth. Yahoo stock, which touched a three-month high above 36 on Tuesday, was down 1.5% in midday trading in the stock market today , below 35.

One Item In Red Hat’s Q4 Earnings That Blew The Surprise

Despite a fourth-quarter earnings report that flew past estimates, Red Hat ( RHT ) stock fell Wednesday as analysts raised concerns of an unexpected slowdown. The line item that spooked investors was a slowing in customer billings and confusion about future revenue. “The fourth quarter was a mixed bag, with signs that fundamentals remain strong with large deals, but also billings deceleration and a lack of margin expansion for fiscal 2017,” wrote Pacific Crest Securities analyst Ben McFadden. Red Hat stock was down more than 5%, below 72, in morning trading on the stock market today . Shares had touched a 15-month low below 60 last month after hitting a 16-year high above 84 in December. Red Hat is the leading provider of Linux-based software that businesses use to run operations. Revenue comes from subscriptions that customers pay for software support, training and integration services in using the open-source version of its Linux operating system. Red Hat reported fiscal Q4 earnings after the market close Tuesday for the quarter that ended Feb. 29. Revenue rose 17% to $544 million, or 21% in constant currency, year over year. Earnings per share minus items jumped 21% to 52 cents, the fourth quarter in a row of double-digit gains. Both beat Wall Street estimates. First-quarter revenue guidance also beat, though EPS only met expectations. “Growth of reported billings and deferred revenue were not very good relative to expectations,” BMO Capital Markets analyst Keith Bachman wrote in a research note. “Red Hat’s quarter had something for both bulls and bears.” For the past seven quarters, deferred revenue grew by an average of 20% year over year. In fiscal Q4, it rose 17.6%. Billings rose 13%, compared with the average of 19% in the prior three quarters, Bachman wrote. He maintained an outperform rating on Red Hat stock but lowered his price target to 88 from 90, based on concerns about lower billings and cash flow. RBC Capital Markets maintained an outperform rating on Red Hat with a price target of 95. Needham kept a buy rating and price target of 98. Red Hat has made a strategic shift to cloud computing, a fast-growing tech field dominated by Amazon.com ( AMZN ) , Microsoft ( MSFT ) and Alphabet ( GOOGL ). In November, Red Hat announced a partnership with Microsoft, which made Red Hat software available on Microsoft’s Azure cloud platform. Amazon is being watched by analysts in light of its Amazon Web Services stepping up Linux offerings, in competition with Red Hat.

Red Hat Q4 Earnings Beat Views, But Q1 Profit Outlook Merely Meets

Leading Linux software provider Red Hat ( RHT ) late Tuesday reported fiscal Q4 earnings and revenue that beat Wall Street expectations and helped ease fears of tech spending softening, but its EPS outlook for the current quarter merely met views. Shares were down 4% in after-hours trading, after the earnings release. In Tuesday’s regular session, Red Hat stock rose 1.1% to 75.71. Shares had touched a 15-month low below 60 last month after hitting a 16-year high above 84 in December. The Raleigh, N.C.-based company posted earnings per share minus items of 52 cents, up 21% from the year-earlier quarter. Sales for the quarter that ended Feb. 29 rose 17% to $544 million. Both numbers beat the consensus estimate. Analysts polled by Thomson Reuters on average had expected the cloud vendor to report EPS ex items of 47 cents on revenue of $537 million. For its fiscal Q1, Red Hat guided EPS ex items at 50 cents on revenue of $558 million to $566 million, vs. 44 cents and $481 million in the year-earlier quarter. Analysts had modeled 50 cents and $554.6 million, so while the sales outlook beat, the EPS outlook merely met. Drexel Hamilton analyst Brian White called Q4 “another strong quarter” with a “strong revenue outlook” in a research note after the earnings release. Red Hat revenue comes from subscriptions that customers pay for support, training and integration services in using the open-source version of its Linux operating system. The platform includes applications, middleware, desktop domains and an operating system. Red Hat was founded 23 years ago. “The fourth quarter marked our 56 th consecutive quarter of revenue growth, contributing to Red Hat’s first fiscal year crossing $2 billion in total revenue,” Red Hat CEO Jim Whitehurst said in the company’s earnings release. “The fourth quarter was a strong close to the year as our results exceeded our guidance. “We maintained a high level of execution throughout the fiscal year, which contributed to greater than 20% constant currency revenue growth in each quarter.” Red Hat Reports Record Year-End Backlog Of $2.13 Billion Red Hat said that it had ended the year with a record backlog of $2.13 billion, up 15% year over year. The company has made a strategic shift to cloud computing, a fast-growing tech field dominated by Amazon.com ( AMZN ), Microsoft ( MSFT ) and Alphabet ( GOOGL ). Red Hat has been able to carve out a share of the pie. It focuses on hybrid cloud services, which partly use the low-cost public cloud and partly provide the privacy of private cloud services. “Investors have asked whether the public cloud is a positive driver for Red Hat,” Whitehurst said on the company’s earnings conference call. “We firmly believe that it will be a hybrid cloud world where applications will run across all four footprints — physical, virtual, private cloud and public cloud. “We are providing technologies that enable choice and consistency across all four environments, and we enhance this value with application development technologies, storage and management.” In November, Red Hat announced a partnership with Microsoft, which made the Red Hat Enterprise Linux (RHEL) available on Microsoft’s Azure cloud platform. As part of the deal, Red Hat will provide Microsoft with its enterprise version of Linux for use as the “preferred choice” on Microsoft’s Azure cloud services. Microsoft, formerly a rival, has been rolling out other Red Hat products, including its JBoss Enterprise Application Platform, Gluster Storage and platform-as-a-service product OpenShift. In a research note Monday, Drexel analyst White said that the movement toward open-source software and the momentum to cloud computing “will provide enough of a tailwind to offset any macro softening.” White rates Red Hat stock a buy, with a price target of 98. “We believe Linux will continue to gain market share in 2016 as next-generation applications are developed on RHEL, while we look forward to development of the Microsoft partnership,” White wrote. In a research note last week, Deutsche Bank analyst Karl Keirstead raised the issue about competition from Amazon, which offers a free Linux open-source operating system and support via its cloud-based Amazon Web Services platform. He concluded that the number of migrations from RHEL to Amazon Linux remains quite modest and mostly confined to small enterprise customers. “Larger RHEL-centric customers have only a small mix of workloads on Amazon Web Services, they value operating system consistency across their hybrid infrastructures, they prefer support from Red Hat and/or view the cost savings of a switch as being too modest to be worth the hassle,” Keirstead wrote. He reiterated a buy rating on Red Hat stock, with a 95 price target. Image provided by Shutterstock .