Yahoo! Inc. (YHOO: Quote), owner of Internet's second most popular search engine, said Tuesday after the markets closed that its first quarter profit fell 78% from last year when the company recorded a hefty gain related to Alibaba Group's initial public offering of Alibaba.com. The company also said it expects to reduce its current global workforce by about 5%.
The Sunnyvale, California-based company said it earned $117.6 million or $0.08 per share in the first quarter, compared to $536.8 million or $0.37 per share in the year-ago quarter.
The prior year quarter results included a non-cash gain of $401 million or $0.29 per share, related to Alibaba Group's IPO of Alibaba.com.
Excluding items, non-GAAP net income for the first quarter was $206.2 million or $0.15 per share, compared to $246.1 million or $0.18 per share in the prior year quarter.
On average, 27 analysts polled by Thomson Reuters expected the company to earn $0.08 per share for the first quarter. Analysts' estimates typically exclude special items.
GAAP operating income for the first quarter fell 17% to $100.7 million from $120.6 million a year ago. Operating income before depreciation, amortization, and stock-based compensation expense for the first quarter was $409.0 million, compared to $433.1 million last year.
GAAP revenues for the first quarter fell 13% to $1.58 billion from $1.82 billion in the same quarter last year. Revenues, excluding traffic acquisition costs, fell 14% to $1.16 billion from $1.35 billion a year earlier. Twenty-seven analysts had a consensus revenue estimate of $1.20 billion for the first quarter. Yahoo had forecast first quarter GAAP revenue of $1.525 billion to $1.725 billion.
"Yahoo! is not immune to the ongoing economic downturn, but careful cost management in the first quarter allowed our operating cash flow to come in near the high end of our outlook range," said Yahoo! chief executive officer Carol Bartz. "While we experienced pressure in both display and search advertising in the first quarter, we believe Yahoo! remains one of the most compelling advertising buys on the Internet."
Total marketing services revenues for the quarter fell to $1.38 billion from $1.57 billion in the first quarter of last year, while fees revenues for the quarter declined to $196.9 million from $245.2 million in the last year's quarter.
Marketing services revenues from Yahoo owned and operated sites slipped 10% to $872 million in the first quarter from $966 million last year, driven by a 3% decline in search advertising revenue and a 13% drop in display advertising revenue.
First quarter marketing services revenues from affiliate sites dropped 16% to $511 million from $606 million a year ago, driven mainly by Yahoo!'s efforts to improve traffic quality and lower revenue per search.
U.S. GAAP revenues for the quarter declined 9% to $1.19 billion from $1.31 billion last year, while international GAAP revenues fell 23.5% to $392.11 million from $512.26 million in the prior year quarter.
Yahoo also said Tuesday that it expects to reduce its current global workforce by about 5% to allow flexibility for accelerated strategic investments and targeted hiring in its core operations. The majority of impacted employees are expected to be notified within the next two weeks. The company also said it is continuing to implement non-headcount cost reductions.
The latest round of job cuts marks the third time in little more than a year the company has slashed its head count. In early 2008, Yahoo reduced its workforce by 1,000 and again laid off 1,400 employees in the fourth quarter of last year. At year end 2008, the company had 13,600 employees. The new round of job cuts will be the first workforce reduction since Carol Bartz assumed charge as the CEO.
Yahoo has been attempting to stabilize itself amid the downturn under Ms. Bartz, who was hired in January following a turbulent period that saw an unsolicited takeover bid from software Microsoft Corp. (MSFT) and stiff competition with Google Inc. (GOOG) in the Internet search market.
Separately, Yahoo said Tuesday that Jeff Russakow will join the company on April 24 as senior vice president of customer advocacy. In this role, Russakow will have global responsibility for all of Yahoo!'s customer support functions, including audience, small business, ad operations, and search network quality. Russakow will report to Bartz.
Looking forward, Yahoo forecast second quarter revenue of $1.425 billion to $1.625 billion, which includes traffic acquisition costs. Analysts currently expect the company to post revenue of $1.22 billion, which excludes traffic acquisition costs.
Larger rival Google last week reported first quarter profit that rose 8.4% from last year, helped by higher revenue and tight cost control. However, the company's first quarter gross revenue fell 3% sequentially, the first such drop since the Internet giant went public nearly five years ago.
Google continued to lead the U.S. web search engine rankings in March, followed by Yahoo! Inc. (YHOO), Internet data tracking firm comScore Inc. (SCOR) said last week.
Google sites' share of the U.S. core search market during March was 63.7% of the total searches conducted. The company's market share improved 0.4% from 63.3% reported for the month of February. On the other hand, Yahoo!'s core search market share in March slipped 0.1% to 20.5% from 20.6% reported for the month of February.
Yahoo shares, which have traded in a range of $8.94 to $29.73 over the past year, closed Tuesday's regular trading session at $14.38, up 72 cents or 5.27%. The stock is currently gaining 65 cents or 4.31% in after hours trading.
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by RTT Staff Writer
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