Yahoo ends Bartz's first year on up note

Fourth-quarter revenue falls compared with last year at Yahoo, but the numbers exceed what had been expected of Yahoo as CEO Carol Bartz continues to try to right the ship.

Tom Krazit Former Staff writer, CNET News
Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.
Tom Krazit
3 min read

Updated 3:33 p.m. PST with additional details from conference call, and at 4:40 p.m. with additional information.

Yahoo continued to ease its way back to financial respectability in its fourth quarter, beating estimates from both itself and Wall Street despite a decline in revenue.

In a press release Tuesday, Yahoo said it took in $1.73 billion in revenue during its fourth quarter, down 4 percent from the same quarter last year but up 10 percent from the third quarter. That exceeds the high point ($1.7 billion) of the guidance range Yahoo provided after the third quarter, and revenue of $1.26 billion excluding traffic acquisition costs beat analyst estimates of $1.23 billion.

"Things seem to be returning to a more normal state in the online ad business," said CEO Carol Bartz during a conference call to discuss the company's results Tuesday. Although the totals are still off compared to last year, both search and display ad revenue on Yahoo sites increased from the third quarter to the fourth, as Yahoo's clients became more confident about their marketing budgets and more willing to spend on Yahoo's inventory, she said.

Fourth-quarter net income was $153 million despite the drop in revenue, compared to a loss of $303 million a year ago. Last year's net income number, however, was hurt by a one-time write-off of goodwill. Excluding charges, non-GAAP earnings per share actually fell, from 21 cents last year to 15 cents this year, although Wall Street was expecting just 11 cents in earnings per share this time around.

For the full 2009 fiscal year, Yahoo's first under Bartz, the company recorded $6.5 billion in revenue and net income of $598 million. Revenue was down 10 percent compared to 2008, but net income was up 43 percent.

Yahoo attempted to shed both workers and businesses that it didn't like during 2009 in order to save money, but "2010 is not about divestitures for Yahoo," Bartz said. Instead, the company is planning "acquisitions and investments to make Yahoo even stronger," she said, although she cautioned that those acquisitions will be relatively small.

Yahoo said it expects to record between $1.575 billion and $1.675 billion in revenue during its second quarter, with income from operations at $90 million to $110 million. That does not include any effects that will come into play if the Microsoft search deal is finalized, Yahoo said.

The company did not provide an update on when that deal might be finalized during the conference call. Yahoo and Microsoft are talking to the Department of Justice about the potential anticompetitive impact of the deal, which tends to happen when two large players in a three-player market propose a merger.

Bartz likewise dodged a question regarding Yahoo's plans for its business activities in China. The company is an investor in Alibaba, which runs a Chinese-language content site bearing Yahoo's brand in China. Google, of course, recently threatened to pull out of China unless it can offer an uncensored search engine, and Secretary of State Hillary Clinton last week warned U.S. Internet companies that they have a "shared responsibility" to stand up against Internet censorship.

"We have a good relationship with them," Bartz said, even though Alibaba called Yahoo "reckless" for supporting Google's decision to speak out against cyberattacks believed to be the work of the Chinese government. Yahoo co-founder Jerry Yang sits on Alibaba's board of directors, she said.

As for other international topics, Bartz announced she's no longer looking for a management hire to head up Yahoo's international efforts, as had been the plan to date. Bartz said she couldn't find a candidate she liked, and so the new plan is to merge the Emerging Markets group into the other three geographical divisions: Asia-Pacific, Americas, and Europe, the Middle East, and Africa (EMEA). The current leaders of those groups will continue on, she said.