Internet giant Yahoo! Inc has reported a net income of $3.16 billion in the three months ended September 30, 2012 largely due to sale of part of its stake in Chinese e-commerce portal Alibaba Group Holding Ltd.

In the year-ago period, the company had a net income of $293.29 million, Yahoo said in a statement.

However, the company’s revenue fell one per cent to $1.2 billion in the July-September quarter of 2012.

Marissa Mayer, who had joined Yahoo! in July as CEO after serving as a top Google executive, said: “Yahoo! had a solid third quarter, and we are encouraged by the stabilisation in search and display revenue.’’

“We’re taking important steps to position Yahoo! for long-term success, and we are confident that our focus on quality and improving the user experience will drive increased value for our advertisers, partners and shareholders,” she added.

The company’s quarterly profit surged as Yahoo! has closed the initial stage of its share repurchase agreement with Alibaba, receiving pre-tax proceeds of a total $7.6 billion, including $6.3 billion in cash and the remaining $800 million in preferred shares.

Yahoo! said it plans to give 85 per cent or $3.65 billion of that amount, after taxes, back to shareholders.

Revenue from display advertising segment that includes graphical and video ads among others, was flat from a year ago period at $452 million, while search advertising revenue stood at $414 million, up 11 per cent from the year-ago period.

Yahoo!, which had 40 per cent stake in Alibaba, has sold half of its stake in the portal. The Alibaba sale left Yahoo! with $9.4 billion in cash at the end of September quarter. Out of the total cash, the company has earmarked $2.5 billion to pay in taxes in the fourth quarter.

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