Yahoo’s revenue slide eases in 4Q, lifting earnings above analyst expectations

By Michael Liedtke, AP
Tuesday, January 26, 2010

Yahoo 4Q earnings top analyst views as slump eases

SAN FRANCISCO — Yahoo Inc. moved further down the road to recovery in the fourth quarter as online advertising began to snap out of a yearlong stupor to ease the Internet company’s long-running slump.

The results released Tuesday represented Yahoo’s best performance since the company hired Silicon Valley veteran Carol Bartz as chief executive a year ago. Bartz has been vowing since her arrival to engineer a turnaround that eluded her two predecessors, Terry Semel and Jerry Yang.

Yahoo promised to deliver even more meaningful progress to start this year. Management projected its revenue would rise about 3 percent to $1.63 billion during the January-March period, ending five consecutive quarters of decline.

The lessening erosion in Yahoo’s Internet ad sales during the fourth quarter provided the latest evidence that the market is picking up again as marketers feel better about the economy. Google Inc., the Internet’s dominant advertising vehicle, closed out 2009 with its most robust growth of the year.

“Things seem to be returning to a more normal state in the online advertising business,” Bartz told analysts in a Tuesday conference call.

Yahoo earned $153 million, or 11 cents per share, during the final three months of 2009, rebounding from a loss of $303 million, or 22 cents per share, in the prior year.

If not for charges for internal reshuffling and a proposed search partnership with Microsoft Corp., Yahoo said it would have made 15 cents per share in the quarter. That topped the average estimate of 11 cents per share among analysts surveyed by Thomson Reuters.

Yahoo shares climbed 45 cents, or 2.8 percent, in extended trading. Before the results came out, the stock ended Tuesday’s regular session at $15.99, up 13 cents.

Revenue remained in a rut during the latest quarter, slipping 4 percent to $1.73 billion. By contrast, Google’s fourth-quarter revenue surged 17 percent. Yahoo still did better than the first nine months of 2009, when the company’s revenue dropped 12 percent.

In a sign of Yahoo’s growing confidence, the company added 700 workers to its payroll in the fourth quarter to end December with 13,900 employees. That’s still down from Yahoo’s recent peak employment of 15,200 workers in September 2008.

Yahoo also intends to buy other companies this year, Bartz said, setting her sights mostly on small deals that improve the company’s technology and bring in more compelling content to its Web site.

“We are done looking inward,” Bartz told analysts. “We are looking outward at the incredible opportunities ahead.”

For all of 2009, Yahoo earned $598 million, or 42 cents per share, on revenue of $6.46 billion. That compared with income of $419 million, or 29 cents per share, on revenue of $7.21 billion in 2008.

The worst U.S. recession since World War II hindered Bartz through most of last year as skittish advertisers reined in spending on all media, including the Internet, where Yahoo has long been a marketing magnet.

Yahoo, based in Sunnyvale, Calif., had been struggling even before the recession’s onset in December 2007, as Google widened its lead in the Internet’s lucrative search market and online hangouts such as Facebook emerged as new hot spots for socializing and advertising.

Since her arrival, Bartz has been trying to spur more advertising by re-establishing Yahoo as the center of people’s online lives. The makeover has included a redesigned front page that makes it easier to connect to Facebook and other Web sites. The front page sold all its available advertising in the fourth quarter, Bartz said.

Yahoo was especially pleased with renewed spending on its bread-and-butter — the online billboards known as display advertising. Sales in that category were flat from the same time last year, but climbed 26 percent from the third quarter. That was Yahoo’s largest sequential gain in display advertising in three years.

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