Yahoo beats estimates - a win for CEO

The Internet search engine reports fourth-quarter losses but adjusted earnings beat estimates. New chief Carol Bartz says the company has 'work to do.'

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By Ben Rooney, staff writer

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NEW YORK ( -- Yahoo Inc. reported a fourth-quarter net loss Tuesday, but the Internet search engine's earnings, after adjusting for certain one-time charges, beat analysts' expectations.

The Sunnyvale, Calif.-based company reported a net loss of $303 million, or 22 cents per share, in the three months ended Dec. 31, compared with earnings of $206 million, or 15 cents per share, a year ago.

Excluding certain charges, such as a $108 million restructuring charge related to layoffs announced late last year and a $488 million "goodwill" impairment charge, Yahoo said it earned $238 million, or 17 cents per share. That was higher than analysts' consensus forecast of 13 cents per share, according to Thomson Reuters.

Sales in the quarter fell 1% to $1.8 billion from $1.83 billion. Excluding traffic-acquisition costs, which is the portion of revenues shared with partners, Yahoo reported sales of $1.37 billion, down 2% from $1.4 billion a year ago and in line with analysts' expectations.

Looking ahead, Yahoo said it expects first-quarter gross sales in the range of $1.52 billion to $1.72 billion, which is down from $1.82 billion in the first quarter of 2008. The company declined to offer full-year earnings guidance due to uncertain economic conditions.

"We have work to do, but I am excited by Yahoo's opportunities, and encouraged by the tremendous innovation and momentum I've seen since joining the company as CEO," said Yahoo chief executive officer Carol Bartz in a statement.

Tuesday's results are the first since Bartz was named the company's CEO two weeks ago. Bartz replaced Yahoo co-founder Jerry Yang, who rejected a takeover offer from software giant Microsoft (MSFT, Fortune 500) last year. The stock has plunged about 60% since Microsoft made its offer nearly a year ago.

Yahoo also has struggled to keep pace with its top rival, Google (GOOG, Fortune 500), over the past few years. Last week, Google reported an 18% jump in fourth-quarter revenue to $5.7 billion, up from $4.83 billion in the year-earlier quarter.

Bartz acknowledged that Yahoo has "some fundamental issues that need to be addressed," but she maintained the company's product innovations and aggressive cost-cutting measures will help it weather the current economic downturn.

"I did not come to Yahoo to sell the company," Bartz told analysts in a conference call. "This is a fantastic Internet property that doesn't deserve everybody trying to pick it, and pull it, apart"

However, Bartz did not expressly rule out selling certain parts of the business or entering into partnerships.

"My job is to make sure that as a company, we look at anything that makes sense long-term and creates shareholder value," she said. "If there's something interesting to look at, we'll look at it."

Analysts say Yahoo could renew its courtship with Microsoft once Bartz, who has been on the job for nine days, is situated at the company.

"It would be very surprising to see Yahoo with a similar structure a year from now," said Rob Sanderson, an analyst who covers Yahoo for American Technology Research.

"The fundamental picture is far from rosy," he said. "The macro environment is really tough with their exposure to big-display advertising."

Sales of display ads, also know as banner ads, have dwindled in recent quarters. Advertisers in the automotive and financial sectors, which are big consumers of Yahoo's display ads, have scaled back advertising budgets due to the weak economy.

For the full year, Yahoo reported net income of $424 million, or $0.29 per share, down 35% from $660 million, or $0.47 per share in 2007. Excluding certain charges, Yahoo's posted a profit of $642 million, or $0.46 per share.

Sales in 2008 rose 3% to $7.2 billion. Excluding traffic-acquisition costs, revenue rose 6% to $5.4 billion.

Yahoo (YHOO, Fortune 500) shares rose 3% to 11.66 in after-hours trading. That followed a gain of 1.5% in regular trading on the Nasdaq Tuesday. To top of page

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