Embattled internet search giant Yahoo is taking legal action against its big new rival Facebook, claiming infringement of ten patents that it sees has given the social media giant a foot up in the display advertising market. This makes Yahoo now the latest tech player to sue for alleged patent infringement (see Gold in them patents and Patent wars). Earlier this week, we commented on Google and Oracle heading back to court (see here) over Java.
We have discussed the continuing decline of Yahoo for some time now (see Yahoo enters its ‘carcass phase’). The company will hope that, if successful, the challenge will help it regain ground in the internet search market where it is now really an also ran, way behind leaders Google and Facebook.
Investors took some relief in the fact that Yahoo met its revenue and profit guidance for the first quarter. In the three months ended 31 March, revenue, excluding traffic acquisition costs, was up 1% to $1.08bn, and operating profits fell 11% to $169m, which drove the operating margin down 2.2 basis points to 15.7%. Yahoo’s shares rose on the news, albeit a muted 1.5%.
We are less than convinced that there is yet a clear strategy in place to turn things around. New CEO Scott Thompson announced a new leadership structure that will now report into three operating groups – consumer, technology and regions, although no further details were given. And five new independent directors have also been appointed to the board with C-level backgrounds at American Express, Fox Broadcasting, digital entertainment technology provider Rovi Corp, contact centre software provider Live Ops, and internet company InterActiveCorp. These affiliations should give Yahoo some new avenues to explore. But clearly this is a first step on a long road to a less than certain recovery.