Job Cuts Triple Yahoo’s Profit Margin
Posted on: Wednesday, 21 October 2009, 14:10 CDT
Yahoo more than tripled its net profit with aggressive cost-cutting moves despite a 12-percent decline in revenue as the Internet company reported its third quarter results on Tuesday, AFP reported.
Yahoo’s net profit easily surpassed analysts' forecasts after it soared more than 244 percent in the third quarter to 186 million dollars, or 13 cents per share, from 54 million dollars, or four cents per share, a year ago.
Wall Street analysts had been expecting earnings of seven cents per share for the quarter that ended September 30 and revenue of 1.12 billion dollars.
However, Yahoo’s revenue declined 12 percent in the quarter to 1.57 billion dollars from 1.79 billion dollars a year ago.
The company said it expected fourth-quarter revenue of between 1.6 billion dollars and 1.7 billion dollars, better than the 1.22 billion dollars forecast by analysts.
Cost-cutting measures implemented by Carol Bartz, who was named to replace Yahoo co-founder Jerry Yang as chief executive in January, were the main catalyst behind the better-than-expected earnings.
Bartz reduced the company’s headcount by some 2,000 during the past year and presently has some 13,200 employees. Yahoo also improved its bottom line by selling off the Hong Kong-listed e-commerce company Alibaba.com.
Bartz said that with revenue coming in above their guidance and flat sequentially, they had a solid third quarter that signaled their major businesses had stabilized.
Meanwhile, the company foresaw strength in key areas of its business in the quarter, according to Yahoo chief financial officer Tim Morse. But search advertising revenue fell 19 percent in the quarter while display advertising revenue was down eight percent.
Morse said Yahoo’s efforts to reposition the company are still in the early stages, but they were confident that their investments in the business would enable them to capitalize on growth opportunities as the economy recovers.
Bartz entered Yahoo into a 10-year Web search and advertising partnership in July with Microsoft in an effort to aggressively position itself against rival search market leader Google.
The agreement will see Yahoo using Microsoft's search engine on its own sites while Yahoo will provide the exclusive global sales force for premium advertisers.
The agreement is expected to close in early 2010, but it is subject to review by U.S. anti-trust regulators.
The Microsoft deal is on track and Yahoo will remain a player in the search arena, but without the expense, according to Morse.
He said they still believe the deal will close in early 2010 and they will continue to innovate in the search experience "without spending the billions needed to keep up."
"This is a company that's still very much in the process of being restructured. It's a mild positive. They're doing what they're supposed to be doing," said Olin Gillis, an analyst at Brigantine Advisors.
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Source: RedOrbit Staff & Wire Reports
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