Yahoo! cost-cutting yields 244 pct net profit increase
Due to aggressive cost-cutting measures, internet giant Yahoo! more than tripled its net profit for the third quarter of 2009 despite a 12-percent decline in revenue, the company reported Tuesday.
Yahoo! said its net profit soared more than 244 percent to 186 million dollars (13 cents per share), from 54 million dollars (four cents per share) a year ago, easily surpassing analysts’ forecasts.
However, Wall Street analysts had been expecting much lower numbers: earnings of seven cents per share for the quarter which ended September 30 and revenue of 1.12 billion dollars.
Despite its earnings, the Sunnyvale, California-based company said revenue declined 12 percent in the quarter to 1.57 billion dollars from 1.79 billion dollars a year ago. Yahoo! said that it expected fourth-quarter revenue of between 1.6 billion dollars and 1.7 billion dollars, better than the 1.22 billion dollars forecast by analysts.
The company’s exceptional performance was due in large part to cost-cutting measures implemented by Carol Bartz since being named in January to replace Yahoo! co-founder Jerry Yang as chief executive.
Yahoo! has reduced its headcount by some 2,000 during the past year and presently has some 13,200 employees.
“With revenue coming in above our guidance and flat sequentially, we had a solid third quarter that signals our major businesses have stabilized,” Bartz said in a statement.
Yahoo! chief financial officer Tim Morse said the company saw “strength in key areas of our business” in the quarter.
Search advertising revenue, however, fell 19 percent in the quarter while display advertising revenue was down eight percent.
“Our efforts to reposition Yahoo! are still in the early stages, but we’re confident that our investments in the business will enable us to capitalize on growth opportunities as the economy recovers,” Morse said.
In July, Bartz entered into a 10-year Web search and advertising partnership with Microsoft that set the stage for a joint offensive against search market leader Google.
Under the agreement, Yahoo! will use Microsoft’s search engine on its own sites while Yahoo! will provide the exclusive global sales force for premium advertisers.
The agreement between the Internet portal and software giant, which is subject to review by US anti-trust regulators, is expected to close in early 2010.
Morse told financial analysts in a conference call that the Microsoft deal was on track and that Yahoo! would remain a player in the search arena, but without the expense.
“We still believe we can close in early 2010,” Morse said.
“We’ll continue to innovate in the search experience,” he said, “without spending the billions needed to keep up.”
Yahoo!’s share price gained 5.94 percent to 18.19 dollars in after-hours electronic trading in New York.