Kara Swisher

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Yahoo First-Quarter Results Are as "Meh" as Expected; Company Will Cut Five Percent of Staff (Plus the Full Press Release)

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Yahoo announced its first-quarter earnings today and results were in line with weak expectations.

The company reported an eight cent per share profit, down from 37 cents a year ago. It is a 78 percent drop, although last year Yahoo had unusual investment gains in the previous quarter.

Revenues in the current quarter was $1.6 billion, a 13 percent decline from last year’s $1.8 billion. Excluding sales Yahoo shares with its partners, called the TAC rate, the revenue was $1.16 billion, below the $1.2 billion estimates.

The company’s execs blamed the weak economy for the results, which has impacted display sales especially.

Yahoo (YHOO) also said it would cut five percent of its staff of 13,600, which is close to 700 employees. Other reports of layoffs had been much lower, although BoomTown reported here last week that Yahoo would cut 500 or more.

Those impacted will be notified within two weeks, Yahoo said.

In a conference call later, CEO Carol Bartz said the cuts were aimed at cleaning up inefficiencies at the company.

“Yahoo! is not immune to the ongoing economic downturn, but careful cost management in the first quarter allowed our operating cash flow to come in near the high end of our outlook range,” said Bartz in Yahoo’s press release on the earnings.

Shares of Yahoo were up 5.3 percent to $14.38 yesterday.

In the conference call, there there were questions about cost-cutting, including the additional layoffs, as well as about Yahoo’s talks with Microsoft (MSFT) about a search and advertising partnership.

Going forward, the Silicon Valley-based company estimated that revenue would be between $1.43 billion and $1.63 billion, higher than Wall Street had been expecting.

Here is the entire press release:

Yahoo! Reports First Quarter 2009 Results

April 21, 2009 4:20 PM EDT

SUNNYVALE, Calif.–(BUSINESS WIRE)– Yahoo! Inc. (NASDAQ: YHOO) today reported revenues of $1,580 million for the quarter ended March 31, 2009, a decrease of 13 percent from the first quarter of 2008. Excluding the impact of currency rate fluctuations, revenues for the first quarter of 2009 would have declined 8 percent from the first quarter of 2008. The Company’s non-GAAP operating cash flow for the first quarter of 2009 of $409 million exceeded the midpoint of the outlook range provided by the Company last quarter.

Marketing services revenues declined 12 percent and fees revenues declined 20 percent. As expected, revenues were reduced by the effects of currency rate fluctuations, the sale of Kelkoo and lower fees revenues from broadband partnerships, voice-over IP services and subscription music offerings. Excluding the effects of these items, revenues would have declined 3 percent. Net income per diluted share in the first quarter of 2009 was $0.08, compared to $0.37 in the first quarter of 2008. Net income for the first quarter of 2008 included a non-cash gain of $401 million, or $0.29 per diluted share, related to Alibaba Group’s initial public offering of Alibaba.com, net of tax. Non-GAAP net income per diluted share in the first quarter of 2009 was $0.15, compared to non-GAAP net income of $0.18 per diluted share in the first quarter of 2008. Non-GAAP net income per diluted share excludes stock-based compensation expense, costs for advisors, restructuring charges, net, and the non-cash gain related to Alibaba.com.

“Yahoo! is not immune to the ongoing economic downturn, but careful cost management in the first quarter allowed our operating cash flow to come in near the high end of our outlook range,” said Yahoo! chief executive officer Carol Bartz. “While we experienced pressure in both display and search advertising in the first quarter, we believe Yahoo! remains one of the most compelling advertising buys on the Internet. With our leading audience properties, substantial reach and innovative advertising solutions, we are confident Yahoo! will be well positioned when online brand advertising resumes its growth.”

“Yahoo!’s balance sheet remains strong, and we are continuing to generate free cash flow which provides us with the flexibility to make strategic investments in key talent, platforms, products and infrastructure, even during this economic downturn,” said Yahoo! chief financial officer Blake Jorgensen. “We also are making selective adjustments to our spending to accelerate those strategic investments.”

Revenues

— Marketing services revenues from Owned and Operated sites were $872
million for the first quarter of 2009, a 10 percent decrease compared to
$966 million for the same period of 2008. The decrease was driven by a 3
percent decline in search advertising revenue and a 13 percent decline
in display advertising revenue.

— Marketing services revenues from Affiliate sites were $511 million for
the first quarter of 2009, a 16 percent decrease compared to $606
million for the same period of 2008. The decrease was driven primarily
by Yahoo!’s efforts to improve traffic quality and lower revenue per
search.

Cash Flow and Cash Balance

— Cash flow from operating activities for the first quarter of 2009 was
$262 million, a 67 percent decrease compared to $786 million in the same
period of 2008. Cash flow from operating activities for the first
quarter of 2008 included a $350 million one-time payment from AT&T Inc.

— Free cash flow for the first quarter of 2009 was $214 million, a 67
percent decrease compared to $647 million in the same period of 2008.
Free cash flow for the first quarter of 2008 included a $350 million
one-time payment from AT&T Inc.

— Cash, cash equivalents and investments in marketable debt securities
were $3,691 million at March 31, 2009 compared to $3,522 million at
December 31, 2008, an increase of $169 million.

Cost Initiatives

To allow flexibility for accelerated strategic investments and targeted hiring in its core operations, Yahoo! expects to reduce its number of current employees worldwide by approximately five percent. The majority of impacted employees are expected to be notified within the next two weeks. The Company is also continuing to implement non-headcount cost reductions.

Business Outlook

GAAP revenue for the second quarter of 2009 is expected to be in the range of $1,425 million to $1,625 million. Non-GAAP operating income before depreciation, amortization, and stock-based compensation expense for the second quarter of 2009 is expected to be in the range of $375 million to $425 million. Income from operations for the second quarter of 2009 is expected to be in the range of $80 million to $90 million.

Conference Call

Yahoo! will host a conference call to discuss first quarter 2009 results at 5:00 p.m. Eastern Time today. A live webcast of the conference call, together with supplemental financial information, can be accessed through the Company’s Investor Relations website at http://yhoo.client.shareholder.com/results.cfm. In addition, an archive of the webcast can be accessed through the same link. An audio replay of the call will be available for one week following the conference call by calling (888) 286-8010 or (617) 801-6888, reservation number: 29476596.

Note Regarding Non-GAAP Financial Measures

This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): revenues excluding traffic acquisition costs or TAC; operating income before depreciation, amortization, and stock-based compensation expense (also referred to as operating cash flow); free cash flow; and non-GAAP net income and non-GAAP net income per share. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Statements of Income,” “Reconciliations to Unaudited Condensed Consolidated Statements of Income,” “Reconciliation of GAAP Net Income and GAAP Net Income Per Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share” and “Business Outlook.”


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