Yahoo earnings: Mayer still has much to prove

NEW YORK (CNNMoney)

Since then, Yahoo's stock has been on a tear and analysts are pinning their hopes for a Big Purple Turnaround squarely on Mayer.

Mayer has laid out her plans to usher in a new era at Yahoo (YHOO, Fortune 500), and she's generated more excitement about the company than any of the numerous other CEOs Yahoo has had in the past decade. That includes a buzz-worthy appearance at the World Economic Forum in Davos.

But industry watchers are now starting to look for proof that Mayer can deliver on her promises.

To be fair, Mayer has only been on the job for two full quarters. In October, results for the third quarter beat estimates but were hardly fantastic. Mayer's next test comes via Monday's fourth-quarter earnings report, and it will be a look into the new Yahoo business strategy -- the results of which Mayer began laying out in an all-staff meeting in September.

Mayer wants Yahoo to focus on personalizing the Web for its users. She's also trying to shake up the company culture, urging Yahoo staffers to move more quickly and interact with the Web the way the company's users do. To that end, she eliminated company-issued BlackBerrys in favor of new Apple (AAPL, Fortune 500), Google (GOOG, Fortune 500) and Microsoft (MSFT, Fortune 500) phones.

Mayer has also discussed efforts to revamp search and display advertising, as well as focusing on attracting top talent to Yahoo. Her message is convincing, at least to investors: Shares closed Thursday at their highest level since September 18, 2008.

And so Marissa-love has proliferated, with Yahoos and techies alike wondering if Mayer will finally be the one to right the Yahoo ship after years of failings. Adding to the Mayer obsession is her personal life: She gave birth to a baby boy on September 30 and returned to work after a two-week maternity leave.

Related story: Yahoo CEO Mayer's "God" and "baby is easy" quotes go viral

But, as always in business, the proof is in the numbers. Analysts polled by Thomson Reuters expect Yahoo to report fourth-quarter earnings of 28 cents per share, up 18% from a year ago. But they're forecasting just a 4% gain in revenue.

Of particular concern is Yahoo's display revenue: sales from banners, videos and other graphic ads. Display sales were flat in the third quarter, but that's an improvement over the sharp falls from previous quarters.

Still, analysts want to see a return to strong growth, not just stabilization.

BCG Financial analyst Colin Gillis put his thoughts in a haiku: "Time for the next stage, of the turnaround story: drive revenue growth," he wrote in a note to clients Tuesday.

Related story: Yahoo ordered to pay $2.7 billion in bizarre Mexico lawsuit

Gillis called Yahoo's display performance "anemic," and he's not happy with revenue from Yahoo's search partnership with Microsoft's Bing. Mayer herself called Yahoo's search results "disappointing" last quarter, and analysts will look to her after Monday's earnings report for more clarity on what she plans to change.

J.P. Morgan analyst Doug Anmuth offered tepid optimism about Mayer's reign, saying in a note Friday that he was "encouraged" by her focus on user experience, search, mobile, and more. Like Gillis, he wants more information on changes to search and display, plus investment and recruitment efforts.

Overall, Anmuth said he wants "to see a better path toward improved execution in the core business."

In other words, Mayer's honeymoon period with Wall Street may soon be over. It's time for Mayer to begin proving that her plan to get Yahoo back on track works, starting with Monday's results.

First Published: January 27, 2013: 12:57 PM ET

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Using a credit card? Watch out for the 'checkout fee'

Stores in most states could start charging you a fee on Sunday when you buy something with credit cards, as a result of a Visa and Mastercard settlement last summer.

NEW YORK (CNNMoney)

The new fees stem from a multi-billion dollar settlement announced in July between credit card issuers and millions of merchants.

Visa (V, Fortune 500), MasterCard (MA, Fortune 500) and nine major banks agreed to a $7.25 billion deal to settle charges that they were fixing credit card processing fees. As part of the settlement, credit card issuers said they would reduce these "swipe fees" -- fees paid by merchants to issuers when cards are used -- but only for eight months.

In addition, the settlement also gave retailers the option to tack on a surcharge if a customer uses a credit card. The retailer can only charge enough to cover the processing costs, which is about 1.5% to 3% of the total purchase, according to watchdog group Consumer Action.

This fee doesn't apply to purchases made using debit cards. And it will still be illegal to charge the new fee in 10 states, including New York, California and Texas.

Many big players in the retail industry have been up in arms about the settlement. Stores from the nation's largest retailer down to small businesses have lamented the agreement, claiming that it transferred the wrongdoings of credit card issuers to the consumer.

In November, the National Retail Federation and more than a dozen retailers asked a judge to reject the proposed settlement. In a brief submitted to a U.S. District Court judge in Brooklyn, N.Y., the trade organization wrote that the new fees threaten a merchant's ability to keep prices low for customers.

Wal-Mart (WMT, Fortune 500), Macy's (M, Fortune 500), JCPenney (JCP, Fortune 500), Limited Brands (LTD, Fortune 500), Gap Inc (GPS, Fortune 500). and The Neiman Marcus Group were among those who joined the NRF in claiming that "raising consumer prices by adding an 'interchange tax' is no remedy for Visa's and MasterCard's continuing monopoly abuse."

Related: Local merchants not crazy about swipe fee deal

In a separate statement, Wal-Mart said that it would cost consumers "tens of billions of dollars each year." Target (TGT, Fortune 500) called the agreement "bad for both retailers and consumers."

Merchants have a choice as to whether to implement the surcharge, but it poses quite a dilemma for them: Either get stuck footing the bill for the swipe fees, or risk transferring the cost to customers in an already competitive environment.

Last summer, Target said it had no interest in charging customers who use credit cards more "in order to allow Visa and MasterCard to continue charging unfair fees."

Smaller merchants echoed these concerns over the deal, saying it doesn't go far enough.

MasterCard said it doesn't expect most merchants to put the surcharge into effect, since stores won't want to drive away business.

"We anticipate that they will not impose checkout fees, particularly because the value merchants derive from card acceptance far exceeds their costs," the credit card company said in a statement.

First Published: January 27, 2013: 3:45 PM ET

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Housing to drive economic growth (finally!)

Economists expect the housing market to be the primary driver of growth this year.

NEW YORK (CNNMoney)

Just over half of economists surveyed by CNNMoney identified a housing recovery as the primary driver of economic growth this year. The rest were split fairly evenly between consumer spending, increased domestic energy production and stimulus from the Federal Reserve as major growth drivers.

"Homebuilding activity will likely remain the strongest growing component of the economy in 2013," said Keith Hembre, chief economist of Nuveen Asset Management. "After several years of excess supply, demand and supply conditions are now in much better balance."

Home sales rebounded to the strongest level in five years in 2012, as home building bounced back to levels not seen since early in the recession. Near record low mortgage rates, rising home prices and a drop in foreclosures have combined to bring buyers back to the market.

The economists surveyed also forecast that there will be just under 1 million housing starts this year -- roughly matching the 28% rise in home building in 2012. Moody's Analytics is forecasting much stronger growth -- a 50% rise both this year and next year, which it estimates will create more than 1 million new jobs.

"There's a lot of pent-up demand for housing, and very little supply," said Celia Chen, housing economist for Moody's Analytics. "As demand continues to improve, home builders have nothing to sell. They'll have to build." She said that growth in building will mean adding not just construction jobs, but also manufacturing jobs building the appliances and furniture needed in the new homes, which in turn drives overall consumption higher.

Related: The road to real recovery is open

And economists say the tight supply and renewed demand for housing should lead to higher home values -- about a 3.7% increase according to the survey.

"One of the most significant indirect effects from the housing recovery is the 'wealth effect' on consumers due to the recovery in home prices," said Joseph LaVorgna, chief U.S. economist of Deutsche Bank, who said better home values can affect both consumer psychology on spending as well as their actual finances.

"Even small moves in home prices can have large effects on consumption, because housing comprises such a significant share of household assets," he said.

But even with the bullish outlook on housing, economists are still forecasting only a modest rise in the overall economy this year. The consensus estimate is for economic growth of about 2.4% in 2013, only a modest improvement from the 2012 growth rate of about 2% they're forecasting when the final numbers are in.

By far the biggest concern is a standoff on Capitol Hill. About three-quarters of those surveyed picked Congressional gridlock -- which could result in a cutback in federal spending -- as the biggest problem facing the U.S. economy. Other choices, such as the European sovereign debt crisis, continued high unemployment and increased government regulation, were much less of a concern.

"Washington is now the primary impediment to stronger economic growth," said Russell Price, senior economist of Ameriprise Financial.

First Published: January 27, 2013: 5:33 PM ET

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Boeing keeps building Dreamliners it can't fly

Boeing hasn't slowed production of its 787 Dreamliner despite the federal probe that has grounded the jet.

NEW YORK (CNNMoney)

A federal probe into electrical fires has grounded all 50 Boeing 787 Dreamliners around the world. But Boeing has little choice but to keep its assembly lines in South Carolina and Washington State running at their normal pace, building five jets a month. A significant slowdown in production, let alone a full shutdown, would be too costly for both Boeing and its suppliers who are counting on making parts for the aircraft.

"Stopping production is not going to happen," said Carter Leake, an aerospace analyst with BB&T Capital Markets. A halt in production or even a slow down would risk crucial suppliers going out of business. "They need to keep the lines running to support the supply chain. They can't do that to suppliers that barely survived the three year delay in producing the first plane."

National Transportation Safety Board Chairman Deborah Hersman said Thursday that investigators have yet to determine what caused the two lithium battery fires earlier this month that led the FAA to ground all Dreamliners. So even though Boeing has no idea what kind of fix to the aircraft will eventually be required, it continues to make the planes as if there is no problem.

Related: What's wrong with the Dreamliner?

"If it stopped it would be very difficult to start production again," said Chris DeNicolo, aerospace credit analyst for Standard & Poor's. And Boeing still has 800 Dreamliner orders left to fill for airlines.

Related: Dreamliner - Where the parts come from

Boeing spokeswoman Kate Bergman confirms the manufacturer hasn't changed its production schedule since the Dreamliners were grounded. Indeed, the manufacturer still plans to double production by year's end. The company would not say how many planes have been built since the FAA grounded the jets on Jan. 16, or what it will do with the completed aircraft since it can't fly them off Boeing's property.

NTSB's Hersman said the probe is only in the very early stages and suggested it could take a long time to resolve.

"This is not something we expect will be solved overnight," she said. "We are prepared to be methodical."

Related: United: Passengers will 'flock' back to Dreamliner

Leake said he is worried that the relatively quick fix that many investors were hoping for is becoming less and less likely. Airlines eager for the jet's improved fuel economy have yet to cancel any orders due to the grounding. But that won't necessarily be the case forever.

"It does sound like we're in the first inning," Leake said. "I don't know what the tipping point is. If it's three months, they'll be no cancellations, six months, some cancellations, Nine months, it's a big problem."

Working in Boeing's favor is the fact that it has more than $11 billion in cash and short-term investments on its balance sheet.

"There's an ability [for it] to absorb the additional costs," said DeNicolo. "The rest of its commercial airplane business is doing quite well."

The Dreamliner was supposed to be a major profit driver for Boeing, but that won't be the case as long as it's building planes that it can't deliver.

First Published: January 25, 2013: 4:44 PM ET

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RIM to advertise BlackBerry 10 during Super Bowl

NEW YORK (CNNMoney)

It's RIM's (RIMM) first-ever Super Bowl commercial, and while the company didn't say how much it spent, Super Bowl broadcaster CBS (CBS, Fortune 500) previously told CNNMoney that 30-second spots are going for a record high of at least $4 million.

RIM will unveil the BlackBerry 10 platform at events on Wednesday, as well as the first two devices to run on the new platform. It's been a long time coming: The software had previously been slated for release in early 2012, which was pushed to late 2012, and again to the first quarter of 2013.

While delays in tech do happen, the news was damning for the struggling RIM because BlackBerry 10 is meant t to be the crown jewel of the company's turnaround plan. Critics wondered if RIM would even survive long enough to launch the OS.

Now that launch day is nearly upon us, RIM is doing all it can to market BlackBerry 10. In addition to the Super Bowl ad, RIM said it will push BlackBerry via online ads and on social networks before and after the game. Launch day on Wednesday includes BlackBerry events around the globe.

Related story: RIM's fate hangs on BlackBerry 10

So RIM will survive to see BlackBerry 10 launch, but the delay has left the company stuck in a holding pattern. Everyone from Apple (AAPL, Fortune 500) to Nokia (NOK) to Microsoft (MSFT, Fortune 500) released new gadgets in the fall, but RIM was essentially forced to wait for the BlackBerry 10 software before selling any significant new hardware.

The company has said BlackBerry 10 will run on a smaller number of devices with essential smartphone features: a much-improved camera, a modern Web browser and social-networking integration. The software will allow customers to access e-mail with one swipe from any app, and it will shift automatically between personal and corporate modes.

RIM's main problem is its lost stronghold in the corporate market, where it once dominated. Rather than issuing company BlackBerries, many employers now have workers bring their own devices into work, usually Apple's (AAPL, Fortune 500) iPhone and Google's (GOOG, Fortune 500) Android devices.

First Published: January 25, 2013: 5:32 PM ET

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China's growth to hit 8% in 2013

Davos, Switzerland (CNNMoney)

"I think China's growth rate will be about 8% this year," Yi Gang said during a debate at the World Economic Forum in Davos, Switzerland. He said consumer price inflation could reach 3% or slightly higher.

The world's second-biggest economy grew by 7.8% last year, well below the average 10% growth seen in the past three decades but better than the government's own target of 7.5% and above analyst expectations.

The annual figure was boosted by a recovery in industrial production and exports in the fourth quarter, which grew 7.9%, prompting economists to forecast a slow but steady recovery in 2013

The acceleration in the last three months of 2012 followed seven quarters of slowing growth as China felt the impact of weak activity in the United States and Europe, as well as its own efforts to control a real estate boom and contain inflation.

Related: China's hottest companies

China's manufacturing sector showed more signs of improvement this month, with a preliminary reading of purchasing managers' sentiment rising to its highest level in two years.

Inflation rose to 2.5% in December, as a spurt of extremely cold weather drove food prices higher. That compared with 2% in November, but still represents tame inflation -- the government aims to keep annual inflation below 4%.

China is trying to rebalance its economy, placing greater emphasis on consumption. Yi said domestic demand was playing an ever more important role in the economy as growth in incomes outpaced GDP growth.

"Consumption is very robust," he said.

China would continue to aim for a reduction in its current account surplus as a percentage of GDP, he said. The figure stood at 2.8% of GDP in 2012.

First Published: January 26, 2013: 11:42 AM ET

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Chicago mayor asks banks to cut off gun makers

Chicago Mayor Rahm Emanuel wants banks to stop lending to gun makers.

WASHINGTON (CNNMoney)

Emanuel, mayor of the nation's third-largest city and former chief of staff to President Obama, wrote the CEOs of Bank of America (BAC, Fortune 500) and TD Bank (TD), since they finance gun makers that lobby against federal and local efforts to toughen gun control laws.

Bank of America gives Sturm, Ruger & Company Inc. (RGR) a $25 million line of credit and TD Bank gives Smith & Wesson (SWHC) a $60 million line of credit, according to the letter.

"I ask you to use your influence to push this company to find common ground with the vast majority of Americans who support a military weapons and ammunition ban, and comprehensive background checks," Emanuel wrote to Bank of America CEO Brian Moynihan. He wrote a similar letter to TD Bank CEO Bharat Masrani.

Both Bank of America and TD declined to comment.

Smith & Wesson and Sturm, Ruger make a wide variety of firearms, including the semiautomatic rifles that are known variously as assault weapons or modern sporting rifles.

Related: Gun industry thrives in face of ban proposal

Emanuel pushed for tougher gun control measures long before the slayings of children and teachers at a Newtown, Conn., elementary school last month. Two years ago, the Supreme Court overturned the city's handgun ban, forcing the city to rewrite its laws. Chicago maintains some of the nation's toughest gun control laws, including registration of any kind of gun and a ban on assault weapons.

"Doing business with gun manufacturers might benefit the banks' bottom line, but they put our police officers, our children, and our communities at risk," Emanuel said in a Friday statement.

His office has also ordered city pension and retirement funds to divest shares in gun makers. This week, the Chicago Municipal Employees Annuity and Benefit Fund agreed to shift $1 million from manufacturers of assault rifles, including Freedom Group, Smith and Wesson and Sturm, Ruger.

- CNN's Todd Sperry contributed to this report.

First Published: January 25, 2013: 2:56 PM ET

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Boeing keeps building Dreamliners it can't fly

Boeing hasn't slowed production of its 787 Dreamliner despite the federal probe that has grounded the jet.

NEW YORK (CNNMoney)

A federal probe into electrical fires has grounded all 50 Boeing 787 Dreamliners around the world. But Boeing has little choice but to keep its assembly lines in South Carolina and Washington State running at their normal pace, building five jets a month. A significant slowdown in production, let alone a full shutdown, would be too costly for both Boeing and its suppliers who are counting on making parts for the aircraft.

"Stopping production is not going to happen," said Carter Leake, an aerospace analyst with BB&T Capital Markets. A halt in production or even a slow down would risk crucial suppliers going out of business. "They need to keep the lines running to support the supply chain. They can't do that to suppliers that barely survived the three year delay in producing the first plane."

National Transportation Safety Board Chairman Deborah Hersman said Thursday that investigators have yet to determine what caused the two lithium battery fires earlier this month that led the FAA to ground all Dreamliners. So even though Boeing has no idea what kind of fix to the aircraft will eventually be required, it continues to make the planes as if there is no problem.

Related: What's wrong with the Dreamliner?

"If it stopped it would be very difficult to start production again," said Chris DeNicolo, aerospace credit analyst for Standard & Poor's. And Boeing still has 800 Dreamliner orders left to fill for airlines.

Related: Dreamliner - Where the parts come from

Boeing spokeswoman Kate Bergman confirms the manufacturer hasn't changed its production schedule since the Dreamliners were grounded. Indeed, the manufacturer still plans to double production by year's end. The company would not say how many planes have been built since the FAA grounded the jets on Jan. 16, or what it will do with the completed aircraft since it can't fly them off Boeing's property.

NTSB's Hersman said the probe is only in the very early stages and suggested it could take a long time to resolve.

"This is not something we expect will be solved overnight," she said. "We are prepared to be methodical."

Related: United: Passengers will 'flock' back to Dreamliner

Leake said he is worried that the relatively quick fix that many investors were hoping for is becoming less and less likely. Airlines eager for the jet's improved fuel economy have yet to cancel any orders due to the grounding. But that won't necessarily be the case forever.

"It does sound like we're in the first inning," Leake said. "I don't know what the tipping point is. If it's three months, they'll be no cancellations, six months, some cancellations, Nine months, it's a big problem."

Working in Boeing's favor is the fact that it has more than $11 billion in cash and short-term investments on its balance sheet.

"There's an ability [for it] to absorb the additional costs," said DeNicolo. "The rest of its commercial airplane business is doing quite well."

The Dreamliner was supposed to be a major profit driver for Boeing, but that won't be the case as long as it's building planes that it can't deliver.

First Published: January 25, 2013: 4:44 PM ET

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RIM to advertise BlackBerry 10 during Super Bowl

NEW YORK (CNNMoney)

It's RIM's (RIMM) first-ever Super Bowl commercial, and while the company didn't say how much it spent, Super Bowl broadcaster CBS (CBS, Fortune 500) previously told CNNMoney that 30-second spots are going for a record high of at least $4 million.

RIM will unveil the BlackBerry 10 platform at events on Wednesday, as well as the first two devices to run on the new platform. It's been a long time coming: The software had previously been slated for release in early 2012, which was pushed to late 2012, and again to the first quarter of 2013.

While delays in tech do happen, the news was damning for the struggling RIM because BlackBerry 10 is meant t to be the crown jewel of the company's turnaround plan. Critics wondered if RIM would even survive long enough to launch the OS.

Now that launch day is nearly upon us, RIM is doing all it can to market BlackBerry 10. In addition to the Super Bowl ad, RIM said it will push BlackBerry via online ads and on social networks before and after the game. Launch day on Wednesday includes BlackBerry events around the globe.

Related story: RIM's fate hangs on BlackBerry 10

So RIM will survive to see BlackBerry 10 launch, but the delay has left the company stuck in a holding pattern. Everyone from Apple (AAPL, Fortune 500) to Nokia (NOK) to Microsoft (MSFT, Fortune 500) released new gadgets in the fall, but RIM was essentially forced to wait for the BlackBerry 10 software before selling any significant new hardware.

The company has said BlackBerry 10 will run on a smaller number of devices with essential smartphone features: a much-improved camera, a modern Web browser and social-networking integration. The software will allow customers to access e-mail with one swipe from any app, and it will shift automatically between personal and corporate modes.

RIM's main problem is its lost stronghold in the corporate market, where it once dominated. Rather than issuing company BlackBerries, many employers now have workers bring their own devices into work, usually Apple's (AAPL, Fortune 500) iPhone and Google's (GOOG, Fortune 500) Android devices.

First Published: January 25, 2013: 5:32 PM ET

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Microsoft's Windows 8 sales are big -- just not big enough

NEW YORK (CNNMoney)

Windows sales rose 24% to $5.8 billion in the quarter that ended Dec. 31. Microsoft unveiled its years-in-the-making Windows overhaul on Oct. 26.

The gain ended a streak of four straight quarters in which Windows sales declined year-over-year. But it pales in comparison to prior launches of the operating system: Windows sales soared 76% during the quarter that Windows 7 launched, and rose by 65% when Windows Vista debuted.

Lisa Nelson, Microsoft's investor relations director, said Windows 8 sales should be put into perspective. PC sales have slumped lately, and the computer market is very different now than it was when previous versions of Windows launched.

Nelson said that a more apples-to-apples comparison would be to measure how much Windows sales have outpaced overall PC sales. The gap between those figures was roughly the same during Windows 8's launch as it was during the debuts of Windows 7 and Windows Vista.

But there's another way to look at it: PC sales have been dreadful for more than a year, and Windows 8 is not doing anything to turn the tide.

Related story: Microsoft is risking an $18 billion empire on Windows 8

Last quarter's Windows sales included some deferred revenue for upgrade-eligible Windows PCs sold earlier in the year. Stripping those upgrades out, Windows sales rose by just 11%. When Windows 7 launched, Microsoft offered similar upgrades. Even with those stripped out, Windows sales jumped 28%.

A different PC market indeed.

Last quarter's Windows revenue includes sales of the Surface tablet -- Microsoft's first PC of its own design. The tablet received mixed reviews and has not sold well, according to analysts. Most estimate that fewer than 1 million units have sold so far.

Microsoft said it would not be breaking out Surface sales -- typically not a sign that a product is a hit.

Shares of Microsoft (MSFT, Fortune 500) fell 2% after hours.

Microsoft also debuted Windows Phone 8 during the past quarter, but sales in that division slipped 11% from last year. Excluding some $380 million in video game sales deferrals, revenue fell by just 2%. The division also includes the Xbox 360 and Kinect entertainment systems.

Office sales slipped 10% ahead of this month's launch of Office 2013.

The Redmond, Wash.-based software giant said net income for its fiscal second-quarter fell 4% to $6.4 billion, or 76 cents per share. Analysts polled by Thomson Reuters forecast had earnings of 75 cents per share.

Sales -- which includes about half a billion dollars of deferred revenue for Windows, Office and Xbox promotions -- rose 3% to $21.5 billion, meeting analysts' forecasts.

First Published: January 24, 2013: 4:48 PM ET

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