KEY POINTS:
Yahoo reported a drop in quarterly profit yesterday and forecast 2008 revenue below Wall St expectations as it tries to shore up its web advertising business.
Shares in Yahoo fell nearly 11 per cent in extended trading.
Yahoo's revenue forecasts for the first quarter and full year disappointed investors, even though Wall St analysts had already slashed their expectations of Yahoo's ability to grow internet advertising in a weakened US economy.
The company also announced a renewed deal with AT&T that analysts expect to bring in less revenue this year and outlined a plan to cut about 1000 jobs. It said the efforts would help produce improved cash flow next year.
"I would classify the results as mediocre and the guidance as cautious," said Ryan Jacob, a fund manager at Jacob internet Fund in Los Angeles.
"I think Yahoo is telegraphing the fact that they will be spending more in 2008 to try and regain their competitive position against Google."
Yahoo's fourth-quarter profit fell more than 23 per cent to US$205.7 million ($264.5 million), or 15c per share, from US$268.7 million, or 19c per share, a year ago. Overall revenue rose 8 per cent to US$1.83 billion and revenue excluding payments to advertising partners rose 14 per cent to US$1.4 billion.
Analysts, on average, had forecast earnings per share of 11c on revenue of US$1.41 billion excluding traffic acquisition costs - the cost of payments to advertising partners - according to Reuters Estimates.
Yahoo's larger share of the display market for corporate advertising makes it more vulnerable to any spending pullbacks in a recession. Analysts expect key rival Google to fare better in a downturn with its dominance of paid search, a form of advertising viewed as more closely tied to sales. Yahoo shares fell to US$18.56 in extended trading.
- REUTERS
