The company reported a net loss of $24.1 million, or 4 cents per share, for the three months ending Sept. 30. Excluding certain charges, Yahoo reported a profit of $8.4 million, or a penny per share.
Those pro forma numbers were in line with Wall Street's consensus estimates for the quarter ending Sept. 30, according to First Call. But they were drastically down from last year's pro forma profit of $81.1 million, or 13 cents a share. For the same period last year, Yahoo reported revenues of $295.5 million.
The sliding revenues could force the company to lay off additional employees. In April, Yahoo announced plans to cut 12 percent of its work force, or about 400 employees.
"We have determined key, go-forward opportunities to create new revenue streams," Chief Executive Terry Semel said during a call with Wall Street analysts. "The realignment may result in a reduction of the total number of employees. We will begin to outline these details on Nov. 15 on our analyst day."
Indeed, Yahoo said its non-advertising revenue grew to 20 percent from 18 percent of overall revenues last quarter. Non-advertising revenues are derived from the company's enterprise software sales, corporate broadcast services and paid premium services.
Total non-advertising revenues increased 30 percent year over year, Susan Decker, Yahoo's chief financial officer, said in an interview. She added that those gains were made despite a decline in its broadcast services division. Meanwhile, revenue from premium services doubled since last year.
In addition, the company's advertising business has become less reliant on dot-com companies, which made up 23 percent of its total advertisers in the third quarter, according to Decker. Last year, that number was about 50 percent, she added.
Wall Street analysts said the report gave no surprises. Despite mixed feelings about Yahoo's future, analysts agreed the advertising market offers no sign of recovery and the portal's revenues likely will continue to slide.
"The quarter and outlook were in line with what we thought would happen," said Anthony Noto, an equity analyst at Goldman Sachs. "We thought revenue would come in below consensus, which it did. Our concern was that the slower advertising environment would cause the consensus numbers for 2002 to go down, which I expect they will."
Yahoo also revised its revenue projections for the year based on a slower fourth quarter. The company expects to report $160 million to $180 million in revenue next quarter, down from Wall Street's estimate of $190.8 million, according to research firm First Call. As a result of the lowered expectations, Yahoo cut its year-end estimate to between $688 million and $708 million. Up to now, the company expected 2001 revenue to reach between $700 million and $775 million.
The company said it expects pro forma earnings before interest, taxes, depreciation and amortization losses to range between a $5 million loss and a $10 million profit for the fourth quarter and between $10 million and $25 million in gains for 2001. Pro forma earnings will likely remain at a penny to breakeven per share during the quarter and 4 cents to 6 cents in earnings per share for the year, Yahoo said.
The expectations offered few signs of improvement for the troubled Internet portal, which has been hammered by a sharp drop-off in online advertising revenues. The company's stock price slid more than 63 percent this year as analysts repeatedly trimmed earnings and revenue projections.
As advertising continues to decline, Yahoo has started focusing on developing different revenue streams to offset losses. Since joining Yahoo in May, Semel has made it a priority to develop paid services on the site and turn the company into a partner traditional media companies would want for online efforts.
"Although there is limited visibility into the future, Yahoo intends to manage through this period and emerge from it an even stronger leader," Semel said in a statement.
Wall Street, however, has criticized Semel for keeping too low a profile, leaving many analysts scrapping for insight into the company's future.
Reaction to the company's conference call with analysts was varied. Some said executives still lack a vision for leading Yahoo through difficult times.
"I think everything wasn't answered," said Jeffrey Fieler, an equity analyst at Bear Stearns. "What's the vision for mass market consumer services? What's going to happen in 2002? They left it as, 'It's anybody's guess.'"
Other analysts found managers' comments reassuring and proof of their ability to guide the company toward the light at the end of the tunnel. Paul Kim, an analyst at Kaufman Brothers, highlighted Yahoo's continued vigilance to cutting costs, which in the end could help profitability.
"Obviously the top line was a little soft, but they managed their costs well," Kim said. "They're executing well in this period."