After Q4 loss, Yahoo sees rough Q1 under new CEO
SAN FRANCISCO (AP) – Yahoo Inc. won't be consummating any deals with its jilted suitor Microsoft Corp. any time soon if Carol Bartz, the beleaguered Internet company's new chief executive, has any say in the matter.
Left on its own, Yahoo may be headed for its fourth consecutive year of lower profit, even as Bartz pledges to engineer a turnaround.
The first quarter almost certainly will bring more misery. In a forecast released late Tuesday with its fourth-quarter results, Yahoo predicted its revenue for the three months ending March may plunge by as much as 16 percent from last year. The rest of the year looks so murky that Bartz didn't even bother to look beyond the first quarter, breaking from Yahoo tradition.
Despite the dour outlook, investors seemed relieved that Yahoo withstood the recession better than analysts had anticipated at the end of 2008.
Although the Sunnyvale, Calif.-based company sustained a $303 million loss in the period, the performance surpassed analyst estimates after factoring out about $600 million in charges to account for 1,500 recent layoffs, office closures and the eroding value of Yahoo's European operations.
Yahoo shares surged 59 cents, or 5.2 percent, in Tuesday's extended trading after finishing the regular session at $11.34.
The rally baffled Sanford Bernstein analyst Jeffrey Lindsay.
"There really wasn't that much to cheer about here," he said. "I think people are averting their eyes to the fact that this business is still really diminishing."
The fourth quarter closed the books on Yahoo co-founder Jerry Yang's fruitless 18-month stint as CEO. Bartz, a technology veteran, took the helm two weeks ago.
Signaling there will be no quick fixes, Bartz told analysts in a Tuesday conference call that she is trying to understand Yahoo's "very complex" organization as she plots a road map for 2009.
Yahoo is bracing for more bumps along the way. In its first-quarter forecast, management predicted the company's revenue may drop by as much as 16 percent from the same time last year. In a change from the company's past practices, Yahoo refrained from looking beyond March because the economy is so fragile.
Known for her blunt talk, Bartz made it clear she has no intention of selling Yahoo to Microsoft in its entirety. But she left open the possibility of turning over Yahoo's search operations to Microsoft – an alternative deal that has been bandied about for the past eight months.
"It's my job to make sure we look at anything that makes sense for the company and creates long-term value for shareholders," Bartz said during the hour-long call.
Just a few seconds later, Bartz indicated she would prefer to keep Yahoo intact so she can develop a strategy for mining more profit from its worldwide audience of 500 million users.
"This is not a company that needs to be pulled apart and left for the chickens," she said.
Reading between the lines of Bartz's remarks, Lindsay predicted it will be several months before Yahoo makes any major moves, such as a Microsoft deal, or exploring other options, such as buying Time Warner Inc.'s AOL.
Yahoo's fourth-quarter loss translated into 22 cents per share. It compared with a profit of 15 cents per share in the year-ago period, when Yahoo earned $206 million.
If not for one-time charges of about $600 million, Yahoo said it would have earned 17 cents per share. On that basis, the figure exceeded the average earnings estimate of 13 cents among analyst polled by Thomson Reuters.
Revenue for the period dipped 1 percent to $1.81 billion, though Yahoo said it would have risen 3 percent if not for currency fluctuations. After subtracting the company's advertising commissions, Yahoo's revenue totaled $1.37 billion, matching analyst estimates.
For all of 2008, Yahoo earned $424 million, or 29 cents per share, on revenue of $7.2 billion. That compared with income of $660 million, or 47 cents per share, on revenue of $7 billion in 2007.
Given Yahoo's woes, investors were bracing for another disappointing performance in the fourth quarter as the dismal economy discouraged spending on Internet ads – the company's main source of revenue.
But Yahoo's ad revenue of $1.59 billion remained largely unchanged from a year ago.
Yahoo's performance in the quarter wasn't as impressive as that of Internet ad leader Google Inc., whose fourth-quarter revenue rose 18 percent. Still, the showing apparently was enough to raise hopes that Yahoo can regain its stride with Bartz in the saddle.
"I'm telling you, there are some really smart people here and they really are motivated to work for a top-notch company," Bartz said. "They just need a little help in their lines of communication and channels and so forth. And the good news is that I happen to be pretty good at that kind of stuff."