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Yahoo! beats but cuts jobs
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April 11, 2001: 6:15 p.m. ET
Internet media company posts slight profit, but will lay off 12 percent of staff
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NEW YORK (CNNfn) - Internet media company Yahoo! Inc. turned in first-quarter financial results Wednesday that were slightly ahead of Wall Street's expectations, and announced a range of cost-cutting measures which include laying off about 12 percent of its staff.
The company also slightly lowered its financial targets for the current quarter and all of 2001.
After the closing bell, Yahoo! said its operating earnings for the quarter were $7.6 million, or a penny per share, compared with $60.5 million, or 10 cents per share, during the same period a year earlier.
Last month, Yahoo! warned that its results would fall short of previous expectations, telling investors that it expected to break even in the quarter. Prior to the warning, the Street had expected Yahoo! to log a profit of 5 cents per share.
At $180.2 million, Yahoo's revenue for the quarter was 21 percent below the $228.4 million it reported during the same period last year. Analysts polled by earnings tracker First Call had expected a revenue decline nearer 24.5 percent.
Shares of Yahoo! (YHOO: Research, Estimates) slipped 16 cents to $15.86 on Nasdaq ahead of the news. They rose 54 cents to $16.40 in after-hours trade.
As one of the few Internet companies that actually has logged some black ink on its bottom line, Yahoo! shares were among some of the highest flyers prior to the dot.com meltdown. Over the past year, they have ranged between a high of $173 and a low of $11.37.
When they warned of the earning shortfall, executives at Yahoo! blamed it on the slowing U.S. economy and uncertainty about its strength moving forward. At the same time, Yahoo! said its chief executive, Tim Koogle, would step down from that post as soon as the company finds a suitable replacement.
In fact, there has been a raft of senior-executive resignations at Yahoo! in recent months, prompting speculation among company watchers that the members of its management team were at odds about how to cope with the dramatic slowdown in Internet advertising. The company derives roughly 85 percent of its revenue from online advertising.
Separately, Yahoo! said Wednesday that Heather Killen, senior vice president of international operations, will leave the company in mid-June.
Review of operations spurs layoffs, reorganization
The company said it conducted a review of its operations during the first quarter and has decided on a number of measures aimed at cutting costs.
In addition to the layoffs, which will affect about 420 employees and are expected to take place within 30 days, Yahoo! said it will: discontinue or reallocate some secondary services on its network of properties; decrease in discretionary marketing, distribution and promotional expenses; outsource some operations; and centralize some businesses across its global organization.
"We made some decisions that were difficult, but which ultimately balance the investment in our growth areas with the adjustments to our near-term business plan to better position Yahoo! for long-term growth," Koogle told investors during a teleconference Wednesday evening.
Susan Decker, Yahoo!'s chief financial officer, said the job reductions should result in cost savings of between $7 million and $9 million per quarter.
Yahoo! has been re-examining its ad-supported business model, moving toward services aimed at businesses as well as more subscription-based consumer services. And executives highlighted some of the steps the company has taken toward that end.
Decker said about 17 percent of Yahoo!'s first-quarter revenue came from business services, up from 10 percent during the same period last year.
In addition, executives highlighted Yahoo!'s recently announced relationship with Duet, an online digital music subscription service created by Universal Music Group and Sony Music Entertainment. They also pointed out that the company introduced its Yahoo! Finance Real-Time Package which delivers real-time, streamed stock quotes, news and analysis to desktops and wireless devices for a fee of $9.95 a month.
During the quarter, Yahoo! said its total audience and page view numbers grew significantly. Total unique users reached 192 million during March, up from 145 million in March 2000. About 67 million active registered members logged onto Yahoo! during March 2001, a 60 percent increase from 42 million in March 2000, the company said.
The company said its total traffic increased to more than 1.1 billion page views per day on average during March 2001, increasing more than 22 percent from page views served during December 2000.
Looking ahead, Yahoo! said it expects to break even in the current quarter on revenue ranging between $165 million and $185 million. Analysts had generally expected the company to earn a penny per share on revenue of about $183.5 million, according to the First Call survey.
For the full year, Yahoo! said it expects to report a profit between 2 cents and 6 cents per share on sales between $700 million and $775 million. The Street most recently had been looking for a profit of 6 cents per share on sales of about $791 million.
Yahoo! said it ended the quarter with $1.72 billion in cash and marketable securities, up $37 million from the fourth quarter of 2000.
Including extraordinary charges and other one-time items, Yahoo! reported a first-quarter net loss of $11.5 million, 2 cents per share, compared with a net profit of $67,6 million, 11 cents per share during the same period a year ago. 
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