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Yahoo Second-Quarter Profit Drops as Spending Rises (Update1)

By Crayton Harrison

July 22 (Bloomberg) -- Yahoo! Inc., the Internet company that added activist investor Carl Icahn to its board yesterday, posted an 18 percent drop in second-quarter profit after spending more on developing new projects.
Net income fell to $131.2 million, or 9 cents a share, the company said today. Excluding fees passed on to partner sites, sales rose 8.2 percent to $1.35 billion, compared with the $1.38 billion average of estimates compiled by Bloomberg.
Development costs advanced 12 percent as Yahoo spent more on improving search-engine technology. While an economic slowdown hurt some customers' advertising budgets, partnerships with clients such as Wal-Mart Stores Inc. helped Yahoo meet its own targets, Chief Financial Officer Blake Jorgensen said.

``It is performing slightly better than the bears suspected,'' LR Burtschy & Co. equity research director Paul Meeks told Bloomberg Radio. Though the performance was mixed, ``the stock might have a little bit of a relief rally.''

Yahoo changed its full-year revenue forecast to $7.35 billion to $7.8 billion from $7.2 billion to $8 billion. The company began forecasting sales under generally accepted accounting principles after the first quarter.
The stock rose 22 cents to $21.62 in extended trading. Yahoo, based in Sunnyvale, California, fell 27 cents to $21.40 by 4 p.m. on the Nasdaq Stock Market. The stock has dropped 18 percent since June 12, when Microsoft said it wouldn't pursue a full takeover of the company.

Stock Performance

Last year, second-quarter profit amounted to $160.6 million, or 11 cents, the company said today in a statement. Excluding costs such as stock-based compensation, last quarter's earnings amounted to 10 cents, trailing the 16-cent average estimate.

Gross revenue climbed 5.9 percent to $1.8 billion. For the third quarter, Yahoo projected gross revenue of $1.78 billion to $1.98 billion, compared with the $1.94 billion estimate of Canaccord Adams Inc. analyst Colin Gillis in New York.

The results may make it harder for Chief Executive Officer Jerry Yang to deliver on his vow to boost sales 72 percent by 2010. Yang has disputed Icahn's assertion that Yahoo needs Microsoft to compete with Google Inc. in Internet searches and online advertising.

Yang, 39, persuaded Icahn to drop his proxy fight at the Aug. 1 shareholder vote in exchange for three seats on an 11- member board. The 72-year-old investor controls almost 70 million Yahoo shares, or about a 5 percent stake. Yahoo said today that it spent about $22 million on evaluating Microsoft's proposals and the proxy contest.

Icahn Versus Yang

Before the agreement, Icahn had sought to replace Yang, saying he didn't have the operational expertise to run the company. The investor helped hasten the departures of executives at companies such as Blockbuster Inc. and Motorola Inc., whose CEOs stepped down after Icahn's lobbying efforts.

With Icahn as a director, Yang may face more internal pressure to reignite the company's growth or sell to Microsoft. Yahoo, which posted eight straight quarters of profit declines before the Microsoft bid, had argued that the Redmond, Washington-based software company's offer didn't reflect its value and growth prospects.

Defending Yahoo's independence, Yang forecast in March that sales would climb to $8.8 billion by 2010 from $5.11 billion last year. Analysts on average project sales of $7.3 billion for that period, according to estimates compiled by Bloomberg.

Offer's History

Microsoft offered $44.6 billion, or $31 a share, for Yahoo six months ago. The software maker sweetened the bid to $33 before walking away from talks as Yang sought more money. Since turning down those offers, Yahoo has spurned multiple proposals from Microsoft to buy its search unit.

Buying Yahoo would help Microsoft shrink the gap with Google in Internet searches and advertising, giving the software maker almost a third of U.S. queries. Last week, the company reported that the loss at its online unit swelled to $1.2 billion in the year ended June 30.

At the same time, Google reported a second-quarter profit that missed analysts' estimates as legal and research costs expanded. Yahoo fields about 20 percent of U.S. searches, one- third as many as Google. Global online ad spending probably will climb to $65.2 billion this year, with more than a third of that coming from searches, according to Framingham, Massachusetts- based researcher IDC.

Sales of banner ads and so-called display promotions on Web pages will rise 12 percent in the U.S. this year, Magna Global said this month. The New York-based researcher lowered its forecast from a 17 percent gain, as soaring fuel and food prices curbed spending. Prices for gas and food helped drive U.S. consumer prices up 5 percent in June, the most since 1991.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net

TP1 Escreveu:Excelentes resultados da yahoo!
Wachovia tem pouco peso no mercado financeiro Americano, qd comparado com outros.

Yahoo Falls Short of Estimates-

Ulisses Pereira Escreveu:

Pq o espanto? Excelentes resultados das empresas

TP1,os resultados ontem divulgados depois do fecho foram, em geral, decepcionantes. E vieram de empresas importantes. Daí a relativa surpresa da forte inversão de hoje.

Um abraço,
Ulisses

Ulisses Pereira Escreveu:

Pq o espanto? Excelentes resultados das empresas

TP1,os resultados ontem divulgados depois do fecho foram, em geral, decepcionantes. E vieram de empresas importantes. Daí a relativa surpresa da forte inversão de hoje.

Um abraço,
Ulisses

Pq o espanto? Excelentes resultados das empresas

TP1 Escreveu:Na minha opinião incorporou-se um cenário que não existe. Tavez esteja a nascer um novo Bull market. Já vem tarde...
Desejo que o Psi20 tb volte ao Bull, sem atrasos...