San Francisco — Yahoo Inc., the Internet search portal ended its disastrous quarter in the red, nevertheless the setback is not as bad as expected. During its Q4 earnings call Tuesday, Yahoo baffled Wall Street’s pessimistic earnings expectations and posted a stronger-than-anticipated fourth-quarter profit, following many months of cost-cutting initiatives coupled with a weak advertising market, as its new chief executive pledged to do whatever it takes to straighten-up the Internet pioneer’s financial ship.
But if the notion given by freshly appointed CEO Carol Bartz is correct, the company is intelligent to look forward, rather than back.
The results that were delivered Tuesday closed the books on Yahoo co-founder Jerry Yang’s fruitless 18-month tenure as CEO. The Sunnyvale, Calif.-based company minted a new leader, Carol Bartz, two weeks ago in its latest attempt to devise a turnaround.
The company accounted a net loss of $303 million for the quarter ended December 31, compared with net income of $206 million from the year-earlier quarter.
Analysts said investors were relieved that the Internet Company managed to deliver beyond midpoint of the guidance it previously gave for fourth quarter. However, its estimate for operating income in the current quarter was below Wall Street estimates.
“They did not bleed to death as much as some of the bear scenarios,” said Martin Pyykkonen, analyst at Wunderlich Securities.
Fourth-quarter profit, excluding write-downs and one-time charges associated with its restructuring efforts, rose to $238 million, or 17 cents per share, compared to $184 million or 13 cents/share for the same period last year, accordingly the company had a net loss of 22 cents/share.
Yahoo’s new CEO Carol Bartz and CFO Blake Jorgensen cracked through the report’s basics promptly. Q4 revenues were down just $26 million year-over year, to $1.806 billion; likewise, marketing service revenues were essentially flat at $1.594 billion compared to $1.590 billion year-to-year. Ad revenues from Yahoo’s owned-and-operated sites were up 3% year-to-year while similar revenues from affiliated sites were down 4%.
“It is my job to make sure we look at anything that makes sense in the long term for the company and creates value,” said Bartz, who took Yahoo!’s helm eight days earlier.
“So yes, everything is on the table. This is not a company that needs to be pulled apart and left for the chickens. It is my job to make sure if there is something interesting to look at, we look at it,” Bartz added.
Yahoo also released full-year results for 2008: Revenue was $2.209 billion, up 3% over 2007’s $6.969 billion. Net income was $424 million, working out to 29 cents/share, down from 2007’s $440 million (47 cents/share). The company pointed out that fluctuation in the currency market hit hard, to the tune of $80 million.
But analysts were noticeably tuned into the call in as much to grasp the speech from new CEO Bartz as to assess the quarter just past, and Bartz did not disappoint.
“I should have realized all those risks before I took the job,” snapped the new CEO at the end of the boilerplate disclaimer recitation at the top of the call, and though stepping out of the way for Jorgensen’s earnings recap, the floor was essentially hers during the Q&A.
New Chief Executive Carol Bartz views on the bright side:
“Despite the challenging economic environment, Yahoo delivered adjusted operating cash flow beyond the midpoint of guidance for the fourth quarter,” Bartz said. “The company also carried out some important investments while aggressively managing costs, leaving us better positioned to weather the economic downturn and emerge stronger, when advertiser spending improves. We have works to do, but I am excited by Yahoo’s opportunities, and encouraged by the tremendous innovation and momentum I have seen since joining the company as CEO.”
Beginning with the Yahoo brand should stand for “the best information site on the Internet, the front page you walk through to start your day and decide how you are going to manage your day,” Bartz outlined her impressions so far, which she emphasized were rather different from those she had gotten as an outside observer.
Overall, Bartz launched an aggressive defense of a company under siege.
“This is a fantastic Internet property and it does not deserve everybody trying to pick it and pull it apart,” Bartz said. Glancing through statistics such as the number of users Yahoo has, how long they stay on the site, and how they value its properties, she said, “This is not a company that deserves to be pulled apart and left for the chickens,” she added, joking that the expression was her Wisconsin upbringing coming to the fore.
“The market place is enormously difficult at the moment, we are still considering strong growth in the search business and display has slowed down and I have no idea how advertisers will react over the next two or three quarters,” Chief Financial Officer Jorgensen said in an interview.
“We are only giving one quarter of guidance because of some of that uncertainty.”
Customers shifted money from branded online advertising that Yahoo! is known for to “performance” ads such as the pay-per-click kinds at which rival Google excels.
Yahoo, the leading provider of online display advertising, has been under pressure for nearly 12 months as it held fruitless merger or partnership talks with Microsoft Corp, Google Inc and Time Warner Inc.’s AOL.
Carol Bartz replaced Yahoo co-founder Jerry Yang as chief executive earlier this month. Yang had been CEO for 18 months.
When asked for details of her “road map” for Yahoo! in 2009, Bartz assured analysts and news reporters on a conference call that she “did not come here to sell the company” and refused to discuss reports that Yahoo! executives have been meeting with counterparts from Microsoft.
Yahoo shares rose to $11.69 in after-hours trading from their close on Nasdaq of $11.34.