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Tickers in this Article: YHOO, GOOG, MSFT, FB
Internet giant Yahoo! Inc. (YHOO) recently announced the acquisition of email and address book management company Xobni for about $30-$40 million (reported by AllThingsD). Financial details of the deal were not disclosed.

San Francisco, Calif.-based Xobni was founded by Adam Smith and Matt Brezina in 2006. The company’s address book apps and plugins help to manage an individual’s contacts from different accounts. The company’s apps enable the making of a list of all the people that the user has emailed, called or texted and creates an address book comprising relevant details of the contact. The profile information includes the contact’s photo, job title, company details, email history as well as updates on social networking sites such as LinkedIn, Facebook (FB) and Twitter. They also support Gmail, Yahoo Mail and Apple’s iCloud and offer Smartr Contacts apps for Android and iPhone devices. After the closure of the deal, Xobni’s 31 employees will join Yahoo at its California headquarters.

After CEO Marissa Meyer took over the reins of the company, it has been quite active on the acquisition front. Some of its recent acquisitions include Astrid, a task-management app maker; Summly, a news-condenser app maker; Stamped, a mobile-review app maker; OnTheAir, which specializes in broadcasting video chats or interviews to online audiences; Snip.it, which is a kind of clipping service for the web; Propeld, a location-based apps maker; Jybe, a social recommendation site; Loki Studios, a mobile gaming start-up, PlayerScale, a gaming infrastructure company, photo app maker GhostBird Software, enterprise conference call service provider, Rondee, mobile app developer Bignoggins Productions and mobile app developer Qwiki Inc.

The acquisitions are part of a strategy to broaden and strengthen Yahoo!’s expertise in the mobile segment as adoption of mobile devices such as smartphones and tablets continue to accelerate. Through these acquisitions Yahoo wants to offer apps with new features to attract more users to its website.

With these acquisitions, Yahoo is picking up a whole lot of engineering talent as well as key technologies and products at a cheaper rate. These acquisitions can help Yahoo! enter the social marketing segment, where its rivals have already established themselves.

We are positive about Yahoo as its search business continues to show signs of improvement, even in the face of tough competition from Facebook, Google (GOOG) and Microsoft (MSFT). Currently, Yahoo has a huge task at hand, which is to bring back its users and make them spend more time on its properties. If successful, Yahoo may reclaim some of its lost market share going forward. This would be crucial in bringing back advertisers as well.

In the first quarter of fiscal 2013, Yahoo generated revenues of $1.14 billion, which were down 15.3% sequentially and 6.6% year over year. Traffic acquisition cost (TAC) was down 42.3% sequentially and 49.9% year over year. Excluding these costs in all periods, net revenue was down 12.5% on a sequential basis and 0.8% from last year, short of the consensus estimate.

Yahoo has a Zacks Rank #1 (Strong Buy).

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