Valleywag Analyst Finds Secret Accounting Gimmick That Saved Yahoo's Quarter

Valleywag analyst Nicholas Carlson has news for Wall Street and the mainstream media (and us!): we're a bunch of morons. You see, says Nick, Yahoo (YHOO) only posted that $1.35 billion in revenue versus the $1.32 billion consensus because of the $401 million in revenue the company booked from its gain in Alibaba's IPO.

Whoah. How did we miss that one?

Well, first because we thought "revenue" and non-cash gains booked as "earnings from equity interests" were different things (reminiscent of that scene in Risky Business in which Tom Cruise thinks that "boffing" and "f***ing" are different sex acts?). And then, of course, there was our blown arithmetic: We thought that the difference between $1.32 billion and $1.35 billion was about $30 million, not $401 million.

Nick:

Yahoo beat analyst expectations for its first quarter revenues by $30 million, $1.35 billion to $1.32 billion. But $401 million of those revenues [sic] were Yahoo's noncash gain from Alibaba.com's initial public offering, from which Yahoo profited because it owns 39 percent of Alibaba Group, Alibaba.com's parent company. Wall Street seems to have taken this caveat into account, bidding Yahoo's stock slightly down in after hours trading. Commenters want to tar and feather Yahoo CFO Blake Jorgensen for including these gains in Yahoo's quarterly revenues [sic].

[The non-cash Alibaba gain was actually booked in "earnings from equity interests", not revenue. Per the release: " Net income for the first quarter of 2008 includes the Company's net non-cash gain of $401 million related to Alibaba Group's initial public offering of Alibaba.com, net of tax, which is included in earnings in equity interests."]