Yahoo Profits Slip; To Cut 1,000 Jobs

After a fairly challenging year, struggling web media company Yahoo posted a 23 percent decline in fourth-quarter earnings and announced plans to cut 1,000 jobs, or roughly 7 percent of its total headcount.

Net income for the quarter was $206 million, or 15 cents per share, down from $269 million, or 19 cents per share, last year. Revenue climbed 8 percent from last year to $1.83 billion.

Despite its cost-cutting plans, CEO Jerry Yang maintains the company is investment mode.

“I strongly believe that increased investment is the only appropriate measure at this time,” Yang said.

Although the news was widely expected, the stock got hammered in after-hours trading, falling $2.14, or 10.3 percent, to $18.65.

“They beat [Wall Street] estimates, and the stock falls 10 percent,” says Jackson Securities analyst Brian Bolan. “People wanted Yahoo to tell us something ‘huge,’ and they didn’t.”

Analysts and investors may have also been disappointed that Yahoo skirted the subject of the economy. Yang made a canned statement about how the company faces “headwinds” going into 2008, but otherwise, management was pretty reluctant to discuss a potential recession.

“We’re not in the business of prognosticating the economy,” Yang said on the conference call this afternoon.

Of equal interest to investors was Yahoo’s renewed deal with AT&T. Under its previous agreement, which was scheduled to expire in the spring, Yahoo received a flat fee for each subscriber. The new agreement is structured as a revenue share. Yahoo spun the deal as “extended” and “expanded,” but it expects to lose between $150 million to $250 million in 2008 revenue as a result of the contract.

“Yahoo had to keep AT&T,” says Brian Bolan, an analyst with Jackson Securities. “I imagine it’s a sweetheart deal for AT&T, but they need AT&T just for their presence in the mobile market. And you don’t see a deal like that available to Google. I think this takes away a lot of the negative speculation that they might lose [AT&T] at the end of the year.”

News source: WIRED NEWS


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