Yahoo Inc. posted a 78% quarterly profit decline as the recession hit its slumping advertising business and the Internet company said it would eliminate about 675 more jobs, or 5% of its work force.
The Sunnyvale, Calif., company was hurt across the board as companies scaled back their marketing budgets and flocked to cheaper alternatives. In particular, search-ad revenue, which had been a bright spot for Yahoo, declined 3% after several quarters of double-digit growth.
The results did little to alleviate the pressure on Chief Executive Carol Bartz to make big changes at Yahoo. While she has cut costs, Ms. Bartz is still working through strategic options, including possible sales of business units and a search-ad pact with Microsoft Corp. Yahoo executives declined Tuesday to discuss any talks with Microsoft.
Yahoo's display-ad business, which historically has been fed by spending from major brands such as car companies and telecommunications providers, dropped more quickly during the quarter. Revenue from display ads on sites Yahoo owns, such as Yahoo Finance and Yahoo Mail fell 13%, compared with a 2% decline in the fourth quarter.
Ms. Bartz, who joined Yahoo two weeks into the quarter, said the company was being pressured by the economy but that "brand advertising will grow in an economic recovery," allowing Yahoo to "take meaningful share." She said that some companies, such as non-U.S. auto makers, have increased their spending with Yahoo.
Overall, Yahoo's revenue fell 13% in the first quarter to $1.58 billion, from $1.81 billion a year earlier. Net income declined to $118 million, or eight cents a share, from $537 million, or 37 cents a share, in the 2008 first quarter, when Yahoo recorded a $401 million noncash gain.
Yahoo and Microsoft are still discussing an agreement that would enable the two companies to combine search-ad assets, with Microsoft taking over the business of selling search ads on Yahoo pages, people familiar with the matter said. But no deal appears imminent, said a person familiar with the situation, adding that it appears both sides "are still talking conceptually."
Yahoo Chief Financial Officer Blake Jorgensen in an interview said he was pleased with the company's quarterly results given the "headwind in the economy."
He added that Yahoo would continue to pay close attention to costs, beyond the fresh layoffs. The company laid off roughly 1,500 employees in December and about 1,000 people in the first quarter of 2008.
Ms. Bartz said the latest cuts would be targeted at certain businesses rather than across the board. She added that the cuts were designed to give Yahoo "flexibility to accelerate hiring in other areas" and said she is continuing to focus resources on larger products that are performing well, such as Yahoo Mail.
Shares of Yahoo, which reported earnings after the market's close, rose 3.8% in after-hours trading to $14.92, after rising 5.3% to $14.38 in 4 p.m. Nasdaq composite trading.
[the article was originally published at http://online.wsj.com/article/SB124034487471340099.html]
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