Yahoo Q4 subtext: 'Marissa Mayer effect' starts to show up

After a full quarter with Marissa Mayer as its chief executive, Yahoo is showing signs of improvement.

But is it time to believe the turnaround story is for real?

That debate is about to get new life breathed into it after the company released non-GAAP earnings of $272.27 million, or 32 cents per share, in the fourth quarter on sales of $1.35 billion. Taking charges into account, Yahoo earned 23 cents per share. The consensus analyst estimate was for 27 cents per share, minus expenses connected with Yahoo's exit from South Korea. Revenue this quarter was expected to fall 8.6 percent to $1.21 billion for the quarter.

The better-than-expected numbers may not be earth-shaking, but they offer Yahoo watchers more hope that Mayer's ability to sprinkle some Google-like magic around her new digs is paying off.

It wasn't by any stretch a blowout but based on the raw numbers, this does qualify as a pleasant surprise, and shares of Yahoo were up in after-hours trading following the earnings release. In the run-up to today's earnings report, a lot of the buzz about Yahoo had centered on whether Mayer would be able to generate meaningful sales momentum.

When Yahoo reported its results last quarter, Mayer was guarded about what she intended to do. No grand strategy got offered other than everything seemed to be pivoting toward mobile and more personalization. She also offered a few hints suggesting Yahoo was thinking about how to offer better -- or more imaginative -- search and display products.

Judging by the steady climb in Yahoo's share price, which began rebounding last fall, that message is getting through. On September 12, Yahoo shares closed at $15.40. They closed Monday at $20.30.

In judging Mayer, the expectations are particularly high because of the platinum resume she brings to the job as a former Google hotshot. Also, she's running a company which enjoys a folkloric role as one of the first big Internet companies, one that seemingly became ungovernable -- with Mayer becoming the company's fifth CEO in five years.

The obvious question is whether there's now enough evidence to declare a turnaround. Given the challenge she faces after taking over a company in disarray, Mayer deserves a bit more breathing room than the usual newbie CEO. Even after an encouraging quarter, the fact is that Yahoo remains the proverbial work in progress with lingering questions about the product road map and management's ability to convince us that this time it's not just another head fake.

In a canned statement Yahoo released along with the earnings, Mayer was quoted as saying:

In 2012, Yahoo exhibited revenue growth for the first time in 4 years, with revenue up 2 percent year-over-year. During the quarter we made progress by growing our executive team, signing key partnerships including those with NBC Sports and CBS Television, and launching terrific mobile experiences for Yahoo Mail and Flickr. At the same time, we achieved tremendous internal transformation in the culture, energy and execution of the company.

During the course of a conference call this afternoon to discuss the earnings report, Mayer talked up what she described as improved morale inside the company and "significantly lower attrition of Yahoos globally." She also expressed satisfaction with recent product launches, particularly in the mobile market.

She singled out a revamp of the mobile Flickr app, which said said was accompanied by a 25 percent increase in the number of photos users upload, view and share on a daily basis.

"This was a huge win for Yahoo and our passionate users," Mayer said.

By the numbers:

Display

• GAAP display revenue: $591 million, a 3 percent decrease compared with $612 million for the fourth quarter of 2011. GAAP display revenue was $2.14 million for the full year of 2012, a 1 percent decrease compared with $2.16 million for the prior year.
• Display revenue: $520 million (not including traffic acquisition costs), a 5 percent decrease compared with $546 million for the fourth quarter of 2011. Display revenue ex-TAC was $1.89 million for the full year of 2012, a 2 percent decrease compared with $1.93 million for the prior year.
• Number of ads sold on core Yahoo Properties: Down 10 percent compared with the fourth quarter of 2011, up about 3 percent compared with the third quarter of 2012.
• Price-per-ad on core Yahoo Properties: Up about 7 percent compared with the fourth quarter of 2011 and up around 15 percent compared with the third quarter of 2012.

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