Tuesday, January 25, 2011

Yahoo! Inc. (NASDAQ: YHOO): Q4 Earnings Preview 2010

Yahoo! Inc. (NASDAQ: YHOO) is scheduled to release its fourth-quarter financial results after the closing bell on Tuesday, January 25, 2011. Analysts, on average, expect the company to report earnings of 22 cents per share on revenue of $1.19 billion. In the year ago quarter, the company reported earnings of 11 cents per share on revenue of $1.26 billion.

Yahoo! Inc. provides online properties and services to users; and marketing services to advertisers worldwide. The Company attracts users every month through its technology and engaging content and services.

Yahoo! Inc. provides online properties and services to users; and marketing services to advertisers worldwide. Yahoo! Inc., together with its consolidated subsidiaries, attracts hundreds of millions of users every month through its innovative technology and engaging content and services, making it one of the most trafficked Internet destinations. The company generates revenue by providing marketing services to advertisers across a majority of Yahoo! Properties and Affiliate sites.

In the preceding third quarter, the Sunnyvale, California-based company's net income was $396.1 million, or 29 cents a share, compared to $186.1 million, or 13 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 17 cents per share in the latest quarter. Revenue rose 2 percent to $1.6 billion. Excluding traffic acquisition costs, revenues fell slightly to $1.12 billion from $1.13 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 15 cents per share on revenue of $1.13 billion. 

At its last earnings call in October, the internet giant said that it expects fourth-quarter GAAP revenue of $1.40 billion to $1.530 billion, and revenue, excluding TAC, of $1.125 billion to $1.225 billion. Analysts currently expect revenue of $1.26 billion for the fourth quarter.  Income from operations for the fourth quarter of 2010 is expected to be in the range of $200 million to $280 million. 

Yahoo CEO Carol Bartz has shut underperforming businesses, cut costs and has continued to improve its products, such as its home page and e-mail service. Last month, the company said that it plans to shut down several products, including Yahoo Buzz and Traffic APIs, in the coming months as part of restructuring, the internet portal. "Part of our organizational streamlining involves cutting our investment in underperforming or off-strategy products to put better focus on our core strengths and fund new innovation in the next year and beyond," Yahoo said in a statement.  In December, Yahoo confirmed that it is cutting 4% of its roughly 14,000 employees. In a statement, Yahoo said that the cuts are being made to position the company “for revenue growth and margin expansion and to support our strategy to deliver differentiated products to the marketplace.” CEO Carol Bartz has pledged to raise the company’s operating margin to as high as 24% by 2013, from its current level of around 12%. 

Yahoo has also sought to focus more on its online display advertising business and other services, while outsourcing the inner workings of its search service as part of a revenue-sharing arrangement with Microsoft Corp. (NASDAQ: MSFT).

However, the company is facing stiff competition from social networking services like Facebook, which are attracting greater numbers of online visitors and advertisers. According to web analytics firm ComScore, Facebook surpassed Yahoo in August to become the second most popular site for watching online video in the United States behind Google Inc's (NASDAQ: GOOG) YouTube.

Yahoo is also the target of takeover speculation, after varying reports that private-equity firms could be interested in taking it private.

In terms of stock performance, Yahoo shares have gained nearly 2 percent over the past year.

Full Disclosure: None.
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