Yahoo's been a tech sector disaster for years, in the sense that growth had flat-lined even as all the company's competitors kept expanding. CEO Marissa Mayer said in March she wanted three more years to turn things around, but investors haven't seemed warm to the idea as she's had four years already.

Yahoo's earnings announcement will likely only gin up demands for something -- anything -- to happen. Although quarterly revenue was up 5 percent year over year, the net loss was $440 million, versus a loss of $22 million last year at the same time. That was a per share loss of 46 cents, below analyst expectations. Yahoo also uses non-GAAP, that is, non-standard, reporting to calculate a 9 cent a share earnings, but when accompany keeps leaning on alternate measures of performance, GAAP is an important guidepost.

"With the lowest cost structure and headcount in a decade, we continue to make solid progress against our 2016 plan," the earnings release quoted Mayer as saying. "Through disciplined expense management and focused execution, we delivered Q2 results that met guidance across the board and in some areas exceeded it."

The lower cost structure included a 20 percent decrease in headcount. Immediate after-hours market response was a slight increase in stock price after 4 pm, but the earnings numbers didn't come out until close to 5 pm, so the market may not yet have digested the news.

The biggest, although not only, culprit in Yahoo's performance was a $482 million impairment of goodwill because management and the board decided that Tumblr, which the company bought in 2013 for $1.1 billion, wasn't worth anywhere near what they had previously thought. Here's a note from the release:

During the second quarter of 2016, we determined that there were indicators present to suggest that it is more likely than not that the fair value of the Tumblr reporting unit is less than its carrying amount. We recorded a non-cash goodwill impairment charge of $395 million and a non-cash intangibles impairment charge of $87 million related to our Tumblr reporting unit. The goodwill and intangibles impairment charges resulted from a combination of factors, including decreases in our projected Tumblr operating results and estimated future cash flows.

In other words, the original price of the company was significantly higher than what time has proven, if you had to estimate how much it might bring on the open market -- and as Yahoo is looking to break up and sell off assets, that's a serious consideration. One that's likely to crank up the stomach acid flow of major investors who were already concerned about the value they'd ultimately see from the stock.

This also wasn't the only bad news. Costs of revenue jumped significantly, so even with a 5 percent increase in revenue, the revenue after traffic acquisition costs was down by 19 percent, year over year. Yahoo is having an increasingly difficult time in keeping more of the revenue that comes in because it becomes more dependent on the traffic of others.

In addition, ads are getting hammered. The price per click for paid search ads was up by 8 percent, but the number of paid clicks dropped by 24 percent, so search-driven revenue was off by 18 percent. Even as the number of sold display ads grew by 9 percent, price per ad was down by 15 percent.

During Yahoo's annual shareholder meeting at the end of June, one investor asked why things kept declining. Mayer said they were investing in steps to grow the business. However, as the business keeps refusing to do so, investor anger will grow while potential acquirers -- what Yahoo needs most of all at this point -- will be asking themselves, "Why exactly do we want to buy them?" The future is not bright.

Published on: Jul 18, 2016
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