While Yahoo posted earnings of 52 cents a share on revenue of $1.09 billion, beating expectations of 30 cents per share on $1.05 billion in revenue, analysts said they were still skeptical about Yahoo's ability to grow its core business.
"It looks like the basic business is a little better, but there's a lot of financial engineering here, they have a smart CFO, so we are going to see how the house is made whether it is made of bricks or straw," said Larry Haverty of Gabelli Funds on CNBC's Closing Bell.
"What's the real operating business doing? It doesn't look like it's growing the topline very much," he added.
Yahoo's core business of display and search advertising has struggled to compete against competitors like Facebook and Google. The company's value is largely attributed to its Alibaba holdings. Yahoo's core business is only worth about $5, perhaps even less, some analysts said. But some measures its core business is worth -$14.66 a share.
On the earnings call Mayer said that the company expects growth in display ads next year, and that mobile is already generating "meaningful revenue." Video is a part our key investment strategy, she added.
Yahoo shared details about its mobile business the first time this quarter. Mobile ads generated more than $200 million in sales on a GAAP basis, Mayer said.
Yahoo cut its workforce by 11 percent as "we've aggressively reduced our contract workers," Yahoo CFO Ken Goldman said.
He acknowledged that the company's "stock buybacks have been pretty aggressive," but he did not rule out the possibility of paying dividends from Alibaba share sales. "We never say never," Goldman said, but he added that share buybacks make more sense for shareholders.
But for Yahoo to have any sort of real turnaround success, the company needs to get a big makeover, O'Leary said.
"I think this needs a complete structural change, a complete change of direction. More along the lines of AOL where you start to return capital back to shareholders because the company has not had success doing it themselves," O'Leary said.
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