Yahoo reports fall in earnings

Yahoo Inc. posted drops in revenue and profit in new Chief Executive Carol Bartz's first quarter on the job, and announced plans to cut about 675 workers from its payroll, as the tech industry showed signs of continued economic battering.

Although Yahoo met analysts' estimates, its revenue fell to $1.58 billion for the first three months of 2009, down 13% from $1.82 billion a year earlier. Net income was $118.7 million, or 8 cents a share, compared with $536.8 million, or 37 cents, a year earlier.

Speaking on a conference call, departing Chief Financial Officer Blake Jorgensen referred to the "difficult economic environment which affected all aspects of our global business," while Bartz vowed to keep investing in new initiatives designed to turn around earlier declines.

Another big tech firm reported an even more challenging quarter Tuesday. Chip maker Advanced Micro Devices Inc. said its first-quarter loss widened to $416 million, or 66 cents a share, from $364 million, or 60 cents, a year earlier. Sales fell 21% to $1.18 billion.

AMD is the second-largest maker of computer chips, behind Intel Corp., and is feeling the effects of slower sales of personal computers. Its neighbor in the Silicon Valley community of Sunnyvale, Yahoo, has struggled to keep up with Internet behemoth Google Inc., which announced its first decline in profit last week.

Yahoo has talked about partnering with Microsoft Corp. in an effort to take on Google, although it spurned a takeover bid by the software giant last year. Bartz would not discuss her dealings with Microsoft on Tuesday.

The company cut 1,600 people from its workforce in the fourth quarter, CFO Jorgensen said on the call, but Bartz said that was because of the economy. The company's workforce of 13,500 will be trimmed an additional 5% as part of a streamlining effort.

Despite the cuts, Bartz outlined many initiatives that she said would leave Yahoo positioned for growth when the economy turned around. It is building up its international presence and trying to make it easier to update the site worldwide. It will continue to invest in search advertising, she said, hoping to include ads that will feature video, animation and other "rich media" instead of just "blue links."

Guy Schuller, who oversees media strategy for Chrysler and other clients of interactive ad agency Organic Inc., said that Yahoo's earnings show how advertisers are putting more emphasis on less-expensive targeted ads, such as search, instead of display ads, "previously their bread and butter."

"While Yahoo competes in these low-cost, high-return areas, they don't bring in the same premium dollars as a home-page ad or high-profile sponsorships," Schuller said in an e-mail.

"Last time I checked, cheaper doesn't typically drive bottom-line results for large-scale publishers like Yahoo. They will need to continue to adapt in order to challenge the larger ad networks and search engines," he said.

With all of Bartz's activity, Yahoo shares are up 18% this year, and closed Tuesday up 72 cents at 14.38 before the earnings news.

"We've been really enamored with her ability to articulate every one of the issues Yahoo has clearly had," said Christa Quarles, research analyst at Thomas Weisel Partners in San Francisco, which has business dealings with Yahoo. "Now it's also time to start showing results."

Quarles said she was encouraged to hear Bartz say she would cut costs. She also praised Bartz's plan to hire Jeff Russakow from Symantec Corp. as head of customer advocacy, a new position.

"We've often lamented, 'Does anybody at Yahoo actually use the products?' " Quarles said. "This guy is coming in to make sure that, as a consumer, you have a good experience at Yahoo."

Bartz, the former CEO of software maker Autodesk Inc. who took over for Yahoo co-founder Jerry Yang in January, offered some colorful commentary in her call with analysts, at one point getting so impassioned that she uttered an obscenity in explaining how she's streamlining the company.

"We have engineers almost in every country, and we have way too many product people," she said. "We had one product management person for every three engineers. There were a lot of people running around telling engineers what to do, but nobody was [expletive] doing anything."

As soon as she said it, she seemed to regret it. "Excuse me," she said. "I knew that would slip out one of these times."

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dan.fost@danfost.com

Bloomberg News was used in compiling this report.

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