Yahoo earnings get boost from Microsoft search deal; Bartz upbeat on display ads

Yahoo earnings get boost from Microsoft search deal; Bartz upbeat on display ads

Summary: Yahoo CEO Carol Bartz said the company had "a good quarter," but it takes a little mathematical gymnastics to verify that claim.

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Yahoo CEO Carol Bartz said the company had "a good quarter," but it takes a little mathematical gymnastics to verify that claim.

Bartz touted display advertising gains of 20 percent from a year ago. However, Yahoo could only say that it stabilized search share amid the transition to Microsoft's platform.

Overall, Bartz was upbeat on the state of display advertising. "Purse strings are starting to loosen up," said Bartz on a conference call, adding that advertisers "are reemerging to position their brands online. "

That transition related to the Microsoft search pact led to a quarter with plenty of moving parts (statement).

Yahoo reported first quarter net income of 22 cents a share on revenue of $1.6 billion, up 1 percent from a year ago. However, Yahoo's earnings were beefed up by the Microsoft search pact. Microsoft reimbursed Yahoo for the cost of operating its search services and algorithm as well as transition costs. Add it up and Microsoft payments beefed up Yahoo earnings by $78 million, or 5 cents a share. Yahoo also had a 2 cent per share gain related to the sale of Zimbra.

Here's a look at the Microsoft reimbursement schedule:

Factoring out one-time items, it appears that Yahoo had earnings of 15 cents a share, 6 cents better than Wall Street estimates. Yahoo's first quarter revenue of $1.6 billion includes $466 million in traffic acquisition costs (TAC) and you get sales of $1.13 billion, a tally that's a bit shy of the $1.17 billion Wall Street estimate.

More on handicapping Yahoo’s Microsoft deal:

As for the outlook, Yahoo projected second quarter revenue of $1.6 billion to $1.68 billion with TAC of $475 million to $495 million. That sum is roughly in line with expectations.

By the numbers:

  • Yahoo marketing services revenue from owned and operated sites was flat at $875 million in the first quarter.
  • Marketing services revenue from affiliates sites were $548 million, up 7 percent from a year ago.
  • Yahoo ended the quarter with cash, cash equivalents and marketable debt of $4.2 billion.

Topics: Microsoft, Banking, Enterprise Software, Social Enterprise

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5 comments
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  • But I thought the MS deal was going to kill Yahoo???

    Guess not huh?
    No_Ax_to_Grind
    • Thats what that guy DonnieBoy said

      so I was sure it was going to be a sure thing. ;)
      AllKnowingAllSeeing
      • True.

        Bet against anything Donnieboy says and you'll come out a winner in the end. ;-)
        No_Ax_to_Grind
  • RE: Yahoo earnings get boost from Microsoft search deal; Bartz upbeat on display ads

    I had no doubts. Microsoft has been a performance company since inception. They've had a few hiccups along the way, but performance is their forte.
    eargasm
  • I don't get it

    I still don't understand what Yahoo's for. I have an email account with them that I use whenever I sign up for something that'll generate a ton of spam, but aside from that, what's their actual purpose apart from hosting a second-rate search engine?
    Tom-Tech