Yahoo 4Q earnings top analyst views as slump eases

The results released Tuesday represented Yahoo’s best performance since the company hired Silicon Valley veteran Carol Bartz as chief executive a year ago. Bartz has been vowing since her arrival to engineer a turnaround that eluded her two predecessors, Terry Semel and Jerry Yang.

Bartz, 61, still has her work cut out for her, but at least Yahoo is turning more profitable because of mass layoffs and other cost cutting orchestrated by the new management team.

"Our business has positive momentum and we feel good as we head into 2010,” Bartz said. Yahoo earned $153 million, or 11 cents per share, during the final three months of 2009, rebounding from a loss of $303 million, or 22 cents per share, in the prior year.

If not for charges for internal reshuffling and a proposed search partnership with Microsoft Corp., Yahoo said it would have made 15 cents per share in the quarter. That topped the average estimate of 11 cents per share among analysts surveyed by Thomson Reuters.

Yahoo shares climbed 20 cents, or 1.3 percent, in extended trading. Before the release of results, it finished Tuesday’s regular session at $15.99, up 13 cents.

Revenue remained in a funk during the latest quarter, slipping 4 percent to $1.73 billion. That still marked progress from the first nine months of 2009 when Yahoo’s revenue dropped by 12 percent. Yahoo’s revenue has now declined in five consecutive quarters, its deepest contraction in eight years.

Yahoo’s forecast for the current quarter calls for revenue growth to resume during the three months ending in March. If Yahoo hits the midpoint of management’s target, first-quarter revenue would rise by about 3 percent to $1.63 billion.

The worst U.S. recession since World War II hindered Bartz through most of last year as skittish advertisers reined in spending on all media, including the Internet, where Yahoo has long been a marketing magnet.

Internet advertisers apparently are feeling more confident now amid growing evidence that the economy is on the mend, despite relatively high unemployment in the U.S. The revival helped lift Google Inc.’s fourth-quarter revenue 17 percent.

"I would absolutely say a recovery in the ad market is under way,” Tim Morse, Yahoo’s chief financial officer, said in an interview.

Yahoo, based in Sunnyvale, Calif., was especially pleased with renewed spending on its bread-and-butter — the online billboards known as display advertising. Sales in that category were flat from the same time last year, but climbed 26 percent from the third quarter. That was Yahoo’s largest sequential gain in display advertising in three years.

Yahoo had been struggling even before the recession’s onset in December 2007, as Google widened its lead in the Internet’s lucrative search market and online hangouts such as Facebook emerged as new hot spots for socializing and advertising.

Since her arrival, Bartz has been trying to re-establish Yahoo as the center of people’s online lives. The makeover has included a redesigned front page that makes it easier to connect to Facebook and other Internet services.

Yahoo also plans to reduce its expenses even further by hiring Microsoft to power its search engine and the advertising tied to the search requests. The benefits from the alliance are expected to start trickling into Yahoo’s results during the second half of this year, if the alliance wins regulatory approval, as expected.