Yahoo profit grows, but revenue dips

chart_ws_stock_yahoo!inc.top.pngClick the chart for more on YHOO. By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney) -- Yahoo reported fourth-quarter sales and earnings that lived up to Wall Street's expectations, with net income rising 120% compared to last year.

Net earnings came in at 24 cents per share, excluding restructuring costs. Analysts polled by Thomson Reuters were expecting 22 cents a share.

Excluding traffic acquisition costs -- revenue shared with partners -- Yahoo (YHOO, Fortune 500) had sales of $1.21 billion. That was a 4% drop from the fourth quarter of 2009. Yahoo attributed the decline in part to the sizeable share of its sales that it forks over to Microsoft, whose Bing technology underpins Yahoo's search site.

The Microsoft revenue share was the subject of several questions during a conference call with analysts.

"We're confident the alliance will show positive growth in search by the end of the year," CEO Carol Bartz said on the call.

Yahoo expects its first-quarter 2011 revenue to come in between $1.02 billion and $1.08 billion.

Shares dropped 3.4% in after-hours trading following the financial report

Advertising and search: It was a generally positive report -- but the year has barely started, and Yahoo's stock is already down 3.9% year-to-date. The company has struggled to shed its Internet-portal past, and it has lost market share in display advertising -- once its biggest stronghold -- to rivals Google (GOOG, Fortune 500) and Facebook.

"You hear a lot of hype about Facebook because they have a lot of little impressions -- but we focus on display revenue," Bartz said on the conference call.

In fact, display advertising was a strong point in Yahoo's fourth-quarter report, with sales rising 16% to $567 million (excluding traffic acquisition costs).

The most painful spot: search. Revenue in that sector was $388 million, an 18% decrease from a year ago.

Bartz's tenure full of layoffs and management changes: Earlier in the day, Yahoo announced it was cutting 1% of its workforce. That's in addition to a long-rumored layoff that finally took place in December, cutting 600 jobs -- about 4% of Yahoo's staff.

Back in October, Yahoo's third-quarter report showed sales that just missed estimates. Bartz struck a defensive tone with analysts, spending several minutes on a conference call recounting the successes during her tenure.

Bartz has been aggressive in cutting costs, and she was praised for landing the search deal with Microsoft's (MSFT, Fortune 500) Bing. Another plus for Yahoo is its 39% stake in Alibaba, one of China's biggest Internet companies.

Still, the turnaround effort has been slow and plodding. Bartz's tenure has been full of problems, and several senior managers have fled the company in the past few months.

Bartz took the helm from Yahoo co-founder Jerry Yang, who was the company's CEO until 2008. Shareholders were incensed when Yahoo snubbed a $47.5 billion buyout deal from Microsoft, and Yang stepped down. To top of page

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