Rating agency Standard and Poor’s said on Wednesday it had cut its credit rating outlook for Internet giant Yahoo, saying revenue growth was likely to be low.
“The negative rating outlook reflects our expectation that Yahoo’s operating performance will remain weak over the next 12 months, primarily due to low revenue growth and rising traffic acquisition cost,” Standard and Poor’s said in a statement.
The move revises downward the agency’s previous “stable” rating for Yahoo.
Standard and Poor’s warned it could cut its current “BB+” corporate rating for Yahoo “if the company’s competitiveness in its display or search advertising businesses continues to decline” and if Yahoo “failed to reverse the negative operating trends affecting EBITDA”, a measure of a company’s operating performance.
It warned that further “debt-financed, shareholder-oriented initiatives or acquisitions” could also cost Yahoo its current rating.
Standard and Poor’s said it could revise Yahoo’s outlook back up to stable if the company implements a business plan that would allow it to keep its market share, make more money from its portfolio and stem a decline in operating profits.