Yahoo CEO 'pleased' about quarter

Yahoo delivers second quarter earnings that were better than expected; CEO Carol Bartz sheds some light on its future plans says Microsoft's Bing is a "good product".
Written by Larry Dignan, Contributor

Yahoo delivered second quarter earnings that were better than expected, shed some light on its future plans and even gave a nod to Microsoft's Bing search engine in contrast to comments made just a few weeks ago.

The company reported second quarter net income of US$141.4 million, or 10 cents a share, on revenue excluding traffic acquisition costs of US$1.14 billion. Wall Street was expecting Yahoo to report earnings of 8 cents a share on revenue of US$1.14 billion. Non-GAAP second quarter earnings were 16 cents a share, on par with expectations. In the same quarter a year ago, Yahoo reported earnings of 9 cents a share on revenue of US$1.34 billion.

As for the outlook, the company projected revenue to be US$1.45 billion to US$1.55 billion including traffic acquisition costs. Non-GAAP operating income is expected to be US$330 million to US$370 million. On a conference call with analysts, Yahoo CEO Carol Bartz said that she was "pleased with the results" considering the economy. Overall, Bartz said Yahoo is seeing less fear in the market place. She added that the ad market may be bouncing along the bottom, but there's so many conflicting data points that a rebound is too hard to call.

Bartz also touted Yahoo's home page redesign as an example of how the company can drive engagement with users. She added that Yahoo is striving to make its adds less annoying to consumers. "We know what we are and we know what we have to do to win," she said.

New CFO Tim Morse said page views were up 7 percent and the company did a good job managing costs.

The tone on the Yahoo call wasn't adversarial about Bing--unlike just a few weeks ago. Perhaps that indicates that there is a Microsoft deal in the works. Bartz said: "I actually think Bing is a good product. I think they've done a good job, but unfortunately they are only a month into it. I think Microsoft should be given kudos for Bing."

Bartz touted Yahoo's strength in verticals such as news and finance, but said the home page is "the big dog".

Yahoo will also focus on the ad experience, said Bartz. "It's no secret that our users are put off by ads that are a detriment to us," she said. Bartz said that Yahoo will look to cut frequent, annoying ads that hurt the company's brand. It will cut its revenue baseline going forward to account for these ads that will get the boot.

The company will also spend on marketing in the third quarter to reposition Yahoo’s brand. Yahoo wants to boost its local ad revenue and has forged a deal with AT&T to bolster the effort.

Marketing services revenue fell 13 percent and fees fell 8 percent from the second quarter a year ago. Owned and operated revenue was US$858 million, down 16 percent from a year ago. Search advertising revenue fell 15 percent with display advertising down 14 percent. Affiliate sites revenue was US$520 million for the second quarter, down 9 percent. The decrease was due to "a shift to lower yielding inventory". Free cash flow was US$266 million, down 15 percent from a year ago. Yahoo ended the quarter with US$4.2 billion in cash.

This article was first published as a blog post on ZDNet.
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