Yahoo Hits Estimates, Gives No Ground on Microsoft

While the software giant's ultimatum looms, Yahoo executives said its transformation strategy is working following a solid quarter.

Yahoo's Jerry Yang
Yahoo CEO Jerry Yang Source: Reuters
Web portal giant Yahoo (NASDAQ: YHOO) reported solid first-quarter results, coming during a time of great uncertainty for the Internet pioneer as it faces a takeover bid from Microsoft.

The company posted $1.35 billion in net revenue (excluding traffic acquisition costs), a 14 percent increase from the same period last year, and toward the high end of its own guidance.

CEO Jerry Yang claimed Yahoo's results were a testament to the success of the company's recent strategy, which has focused on Yahoo reinventing itself as the starting point for Web surfers and the partner of choice for advertisers.

"We are very proud of our Q1 results," Yang said during the company's earnings call with analysts. "Our ability to execute on multiple fronts is clearly improving."

Excluding one-time costs, Yahoo's earnings per share of $0.11 were two cents ahead of analysts' consensus, and off from last quarter's earnings by the same amount.

At $121 million, operating income dropped 28 percent from the same period a year earlier.

Company executives explained the decline as consisting largely of costs associated with severance payouts and fees paid to consultants advising the company in its response to Microsoft's (NASDAQ: MSFT) acquisition bid.

Yahoo's is perhaps the most highly anticipated earnings report in the tech industry this quarter -- but not because the numbers were expected to break dramatically above or below guidance.

Instead, the embattled Web portal has been at the epicenter of what seems poised to be a grand realignment of the biggest Internet companies in the country.

Looming threat

However, those looking for any indication of how the company might respond to Microsoft's increasingly hostile posture were likely to be disappointed.

Yang did not offer any revelations on that front, instead reiterating the reasons why the company's board had decided that Microsoft's offer undervalued its worth -- reasons including the value of Yahoo as a global brand, its worldwide audience and its strength in display advertising.

Some analysts have suggested that a positive earnings report could impel Microsoft to raise its bid.

But Microsoft CEO Steve Ballmer dismissed the impact of Yahoo's financial performance in comments made earlier today, according to a Reuters report.

"We think we can accelerate our strategy by buying Yahoo and will pay what makes sense for our shareholders," Reuters quoted Ballmer as saying. "I wish Yahoo all the success with its results but it doesn't affect the value of Yahoo to Microsoft."

The earnings come at a particularly critical juncture in Yahoo's dealings with its would-be purchaser.

Ballmer's three-week ultimatum -- threatening to go hostile in its bid and nominate a rival slate of directors if Yahoo does not come to the bargaining table in good faith -- expires Saturday.

Continued from Page 1.

During today's call, Yang asked analysts to keep their questions focused on Yahoo's first-quarter performance -- and made it clear that he would not answer forward-looking questions about various scenarios relating to the looming Microsoft bid.

Accordingly, when prompted about the effects of the bid as a distraction, Yang demurred.

"It's hard to say if [Yahoo felt] any impact from Microsoft," he said. "We think we had a really good quarter."

With a mix of pride and resolve that has become characteristic, he opted instead to hang his hat on the numbers his company reported.

"We are well underway in the most important transformation in our history," he said.

"Against the backdrop of the circumstances of the last three months, the results we're delivering are extraordinary."

He added that the darkening macroeconomic climate had been a greater concern to the company.

This article was first published on InternetNews.com. To read the full article, click here.






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