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Apr-23-2008CEO says aiming to maximize value of Yahoo assets(topic overview)
CONTENTS:
- "Our board and management team continue to be open to any and all alternatives, including a Microsoft deal," Yang told investors on a conference call to discuss the company's first-quarter results, released earlier in the day. (More...)
- Current headcount is 13,800 - down from 14,300 in Q4 2007, though Yahoo! added 600 new jobs, said CFO Blake Jorgensen. (More...)
- "I think any company contemplating a merger or acquisition would want to get it through during the Bush administration," said Sidak, expressing a commonly held view in the legal community that, even if Republican nominee John McCain wins the 2008 election, there will be stricter controls. (More...)
- Yahoo has a unique and valuable combination of assets that include our global brand, large worldwide audience, our leadership in online advertising, strategic position in Asia, emerging mobile markets,. tools and technology. (More...)
- Decker: Yahoo is "on the verge of fundamentally changing the game" in the display-ad business. (More...)
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"Our board and management team continue to be open to any and all alternatives, including a Microsoft deal," Yang told investors on a conference call to discuss the company's first-quarter results, released earlier in the day. Yang said the company's recent efforts to remake its business strategy related to technology, audiences and advertising customers were "starting to pay off." Yahoo's top executive said that while the company remains active in the Web search advertising market, its emphasis is on display advertising, which corporate marketers rely on for online brand ads. "While we see opportunities in Web search, our largest opportunity is in display advertising," he said. [1] That produced earnings per share of 11 cents-a-share, against a consensus forecast of 9 cents-a-share. Yahoo! raised its full-year sales forecast to $7.2-8bn, set against analyst's previous forecasts of $5.63bn. Analysts remained divided as to whether the results would be enough to force Microsoft to raise its bid, with Sanford Bernstein's Jeff Lindsay saying they "might post some issues for Microsoft" while Cowen & Co's Jim Friedland said the software giant would be breathing a "sigh of relief" after seeing the numbers. Mr Yang said the results showed the company's renewed strategy to focus on audiences, technology and advertising was "starting to pay off," and that while the company remains active in search, its focus is firmly on display advertising.[2]
Though the company has made progress in search advertising, which has been dominated by Google, Mr. Yang said Yahoo'''s biggest opportunity lies in display advertising. Reuters reported that Microsoft Chief Executive Steve Ballmer said Tuesday that Yahoo'''s earnings report would not prod it to change its offer.[3] Yahoo! president Susan Decker added it was too early to speculate on what options the company has to do a deal with Google on web search advertising, following a trial that began two months ago. The company did not comment specifically on other talks it is believed to be having, such as negotiations with Time Warner's AOL to merge the two's internet operations. Ahead of last night's results, Microsoft chief executive Steve Ballmer hinted it was unlikely to raise its bid, whatever the numbers.[2] When it reports first-quarter results on Tuesday, Yahoo has perhaps a last chance to demonstrate some financial strength and progress it has made in stabilizing the company's Internet media and advertising business after two years of decline. Mid-week, Yahoo is set to complete a test with Google Inc (GOOG.O: Quote, Profile, Research ) on whether Google should run a piece of its Web search ad sales, a move sources familiar with the talks say is part of a plan to merge with Time Warner's (TWX.N: Quote, Profile, Research ) AOL and fend off Microsoft.[4]
On the same call, President Susan Decker said it was "premature" to say whether Yahoo would reach a deal to turn over some part of the company's Web search advertising business to rival-turned-Microsoft-counterweight Google Inc. "It's premature to speculate on what options we may ultimately pursue or whether some form of arrangement might result," Decker said, referring to the test the company had announced two weeks ago of a Google Web search ad partnership. She emphasized that Yahoo aims to remain a significant player in the Web search market while also wringing the most it can in the near term over the revenue it generates from ads sold alongside its Web search services.[5]
Recently, Yahoo! has revealed that it is testing an advertising sales deal with Google in a bid to deter a hostile takeover by Microsoft. It is running a test of Google'''s Adsense for search service which will deliver relevant Google ads alongside Yahoo!'''s search results.[6] "The quarter's results underscore the fact that our strategies and investments are continuing to pay off." It was a busy quarter for Yahoo, and not only because of the Microsoft bid. Yahoo also implemented large scale layoffs in February, previewed its AMP platform with select newspaper publishers, and acquired video platform Maven Networks. Shortly after the quarter ended Yahoo said it would test Google ads on up to 3 percent of its search queries. The test's goal is to increase near-term monetization, president Sue Decker said, though she added, "it's premature to speculate on what options we might ultimately pursue or whether some relationship with Google might result."[7]
Yahoo is said to be seeking closer to $40 per share. Microsoft may raise its bid if Yahoo performs well, but a poor quarter from Yahoo could entice Microsoft to lower its bid. With this possibility looming over it, Yahoo would love some of Google's magic.[8] The call is over? not, in the end, much of talk Microsoft or Google. Now the onus is probably on Microsoft to make its move. It reports its own earnings on Thursday, though hard to see anything big hinging on that. You have to have to try the experiment mentioned in the previous post : In a parallel universe, sans-bid from Microsoft, do these numbers convince investors that Yahoo (NSDQ: YHOO) is worth more than $31 per share, or even close to that? Almost certainly not.[9] Microsoft's original Feb. 1 offer for Yahoo was for $31 per share, which at the time was worth $44.6 billion.[8] Yahoo! has six days left to decide whether it'''s to remain independent or surrender to an unsolicited takeover by Microsoft. The internet giant is racing to find a credible alternative to the takeover by Microsoft or at least force it to increase its offer from $31 a share, according to the Irish Independent. Tomorrow will see Yahoo! disclose its first quarter profits which may demonstrate some financial stability that could benefit its situation, whereas Microsoft'''s results are due out on Thursday.[6] "We think we can accelerate our strategy by buying Yahoo! and will pay what makes sense for our shareholders. I wish Yahoo! all the success with its results, but it doesn't affect the value of Yahoo! to Microsoft,' said Mr Ballmer. His comments came ahead of his own self-imposed deadline of Saturday, after which he promised to lower his $31-a-share bid and/or go hostile if Yahoo! had not accepted his offer. Yahoo!'s shares traded up 4 cents at $28.58 in extended trading following publication of its results.[2]
SAN FRANCISCO (Reuters) - Yahoo Inc (YHOO.O: Quote, Profile, Research ) faces a critical week that could decide whether the pioneering Web company can remain independent or must surrender to an unsolicited takeover by Microsoft Corp (MSFT.O: Quote, Profile, Research ). Yahoo is racing to forge a credible alternative that lets it stay independent or at least forces Microsoft to raise its $31 a share cash-and-stock bid, now valued at $42.8 billion.[4] Updated 2:15 p.m. PDT, with comments from CEO Jerry Yang on the conference call. The Microsoft takeover effort was both between the lines in Yahoo's earnings report and on the bottom line itself. The bottom line part was Yahoo's notation that it spent $14 million on outside advisers related to both Microsoft's bid and exploring other alternatives, as well as for litigation costs related to the bid.[10] I quickly skimmed the conference call materials and the only reference to Microsoft is the $14 million Yahoo! has spent on outside advisors regarding Microsoft's unsolicited bid.[11]
There's a cost to that exploration effort, which is not only measured but had a negative impact: $14 million, applied in the last quarter against costs. Maybe because of the Microsoft bid, maybe because hard work can give one a certain economy of words he's never appreciated before, the tone and the approach of Yahoo this quarter were a polar opposite of the metaphor-laden, adrenaline-pumped, almost sickeningly sweet approach the company's new leaders donned last summer, as they were searching for chicken-soup-for-the-bottom-line to soothe investors' spirits.[12] Yahoo's net income grew to $542 million on revenue of $1.7 billion during the first quarter, coming in at the upper end of its guidance and beating some analyst estimates. The company made the case to investors that it could keep pace with Google in search monetization, but said its greatest ambition is to lead a revolution in display advertising.[7] Exactly who should be buying whom? With only minimal mention of Microsoft from both Yahoo executives and analysts this afternoon, suddenly the "big deal" between the software giant and the portal keeper doesn't seem to be "on." It is one of the biggest uphill battles in the technology industry, and last quarter, it seems "uphill" is the only direction Yahoo knows: Revenues up 9% on the year to nearly $1.82 billion, and gross profit up 11% annually to $1.06 billion versus Q1 2007. Operating income was down 28%, though actually that percentage can fool you: Last year's operating income at this time was low to start with, so the reduction is only $48 million. The shock of the day, if there was one, is that this reduction was much less than expected.[12] Yahoos own forecast for the first quarter called for net revenue to be between $1.28 billion and $1.38 billion, representing growth of between 8 percent and 17 percent from a year ago. Analysts have said that to persuade Microsoft, and its own shareholders, that it deserves a higher valuation, Yahoo needed to report results in the high end of its forecast and preferably raising its financial projections for the remainder of the year.[13] For background, here's a link to Yahoo's financial results for the first quarter of 2008. To recap, Yahoo's net income was essentially flat, excluding a gain from its stake in business-to-business site Alibaba, but revenue excluding commissions paid to partners rose 14 percent to $1.532 billion.[14]
Yahoo, whose board is engaged in high-stakes maneuvers to slip the grasp of Microsoft, reported first quarter revenue of $1.35 billion, excluding traffic acquisition costs, after the market close Tuesday, beating analysts''' consensus estimates of $1.32 billion.[3] The Street was expecting Yahoo's revenue, minus traffic acquisition costs, to hit $1.32 billion and earnings per share of 9 cents; Yahoo delivered $1.35 billion and earnings per share of 11 cents.[15] Financial analysts expect Yahoo to notch revenue of $1.33 billion on earnings per share of 9 cents.[8]
Citi Investment Research is betting Yahoo comes in at $1.34 billion on earnings per share of 10 cents.[8]
Overall net income was $542.2 million, or $.37 per share, including investment gains from Yahoo'''s stake in Chinese Web site Alibaba.com.[3]
Google held a 59.2 per cent share of the U.S. Web search market in February, compared with Yahoo's 21.6 per cent and Microsoft's 9.6 per cent, according to research firm comScore.[16] There are also new O neSearch voice recognition tools, new efforts to embrace the semantic Web for search, and a Google Gearslike browser technology called BrowserPlus in the mix. Yahoo also joined forces with Google and MySpace to form the OpenSocial Foundation, reaffirming its commitment to the open Web after embracing OpenID. Such news portends grand plans for Yahoo, something IDC's Rachel Happe approves of. "I believe it indicates a product strategy and direction that rolls up into something bigger," Happe told eWEEK. "They've started to be very aggressive about opening up their services and participating in standards." Strategically, Yahoo has also taken steps to get closer to Microsoft enemy Google by running Google search ads on its own search platform. Yahoo management is expected to provide more color about this partnership, which had reportedly been doing well and wraps tomorrow.[8] Time runs out by Saturday, the date Microsoft has set for Yahoo to accept the deal or face a drawn-out proxy battle by Microsoft to unseat Yahoo's board. Two weeks ago the software giant threatened to lower its offer if Yahoo did not conclude friendly merger talks with Microsoft by April 26th. Yahoo's chief technology officer will use a speech on Thursday at the Web 2.0 Expo industry show to spell out a strategy to open up Yahoo services such as e-mail, news, sports and advertising to make them more relevant across the Web, not just for users drawn inside its own sites.[4] Unfortunately, the trick isn't fooling impatient investors who sense that an attractive exit strategy may be getting away. Microsoft has threatened to pull its offer and possibly come back with an even lower price if Yahoo! doesn't warm up to the deal later this week. This comes at a time when Yahoo! isn't getting the international assistance it once had.[17]
Rumors also abound that the company has discussed a deal with Time Warner to merge with AOL. As for other things to expect on Yahoo's Q1 call today, Mahaney said he will be listening for management's thoughts on why the Microsoft's offer is insufficient for shareholders and what value-creating alternatives are available to the company.[8] Selling to Microsoft. "Our board and management team continues to be open to any and all alternatives including a sale to Microsoft," Yang said, but, "We will not enter into any transaction that does not recognize the full value of this company." Partnerships such as one reported possibility to acquire AOL in exchange for an investment from Time Warner that could be used to repurchase Yahoo stock.[18] The board and management team continue to be open to any and all alternatives, including a sales to Microsoft. We are exploring a number of strategic alternatives, which we believe will help achieve over-arching goal of maximizing shareholder value. will not enter into any transaction that does not recognize the full value of this company."[11]
After an unusually long reading of the perfunctory warnings, CEO Jerry Yang is trumpeting the just-released results as "all the more remarkable given the recent economic environment and the uncertainties from Microsoft's (NSDQ: MSFT) proposal." They're still open to the right deal: "Since then, our board and management team has been open to any and all alternatives, including a sale to Microsoft."[9] Yahoo! chief executive Jerry Yang attempted to showcase the independent future of Yahoo! as he stressed that the search engine remains open to 'any and all' alternatives, including a deal with Microsoft.[2] SAN FRANCISCO (Reuters) - Yahoo Inc remains open to doing a deal with Microsoft Corp but also continues to explore alternative deals, its chief executive and co-founder, Jerry Yang, said on Tuesday.[1]
The between the lines stuff was in Chief Executive Jerry Yang's comments. In some ways, his words sounded like more of the same. "As outlined in our investor presentation, we believe we can significantly accelerate our revenue growth, return to our historically high margins, and double our operating cash flow by 2010," he said in a statement. "This quarter's solid performance underscores the fact that we are executing on that plan." I read his words more as a pitch for a higher price than as a real justification for his go-it-alone approach. He talked about the strength of the current strategy, but notably didn't use the words "independent company" anywhere in his words. That suggests to me that perhaps Yang has accepted the fact that, either by combining with Microsoft or perhaps AOL, Yahoo's independent days are coming to an end.[10] The company had solid revenue growth, expressed cautious optimism about weathering an economic downturn, and modestly beat analysts' profit expectations. Chief Executive Jerry Yang issued lukewarm metaphors: "Our results this quarter demonstrate we are on the right track. We are pursing the right strategy, and it's beginning to bear fruit."[18]
SAN FRANCISCO (Reuters) - Yahoo Inc's latest quarter results show the company is "on the right track" and management is focused on realizing the fullest value for the company, Chief Executive Jerry Yang declared on Tuesday. "We are totally committed to maximizing the value of this asset," Yang told investors on a conference call to discuss first-quarter financial results.[5] In a conference call, co-founder and Chief Executive Jerry Yang said the results '''underscore the fact''' that the company'''s turnaround efforts are bearing fruit.[3]
Mr Yang, one of the founders of Yahoo! who was parachuted into the chief executive's role last year to boost its floundering fortunes, stressed that the business has a bright future as a stand-alone business after what he said was "one of the most exciting quarters in Yahoo!'s history." Delivering quarterly results at the top-end of expectations, he said he was "very proud" of what the company had achieved in the three months to the end of March. Yahoo! reported its first profit rise in two years, of $542m (£271m) against $142m in the same quarter last year, boosted by a $401m gain in its stake in China's Alibaba, with total sales up 8.7pc to $1.82bn.[2] Microsofts chief executive, Steven Ballmer, has argued that the offer is even more generous now than when it was made, because Yahoos business appears to have deteriorated in recent months. Yahoo countered those claims last month, reiterating its financial outlook for the first quarter and issuing an optimistic three-year forecast.[13]
Yahoo looks to display its value to shareholders and acquirer-hopeful Microsoft in this crucial first quarter. The financial community is waiting to see how Yahoo performs for its first-quarter earnings report April 22, the second of the three search and online ad bellwethers roiling the space with new products, coups and secretive backroom dealing.[8] Since Microsoft's buyout has artificially inflated the market's perceived value of Yahoo!, the downside is precipitous.'' There are alternatives to falling into Microsoft's arms,''but they bear a price. Outsourcing its paid search to Google strips Yahoo! of control of the juiciest slice in the online advertising pie. Combining with smaller dot-com moguls, like Time Warner's (NYSE: TWX ) AOL or News Corp.' s (NYSE: NWS ) MySpace, will come at the expense of reversing its buyout premium.[17] Yahoo rejects that price as too low and has been casting around for other partners. It announced last week a test to outsource search advertising to Google, which sources say is part of Yahoo's plans to form a three-way alliance with Time Warner Inc's AOL to fend off Microsoft. Antitrust experts said regulators would likely oppose any permanent alliance between Google and Yahoo, while they would likely approve Microsoft's proposed merger with Yahoo.[16] The company has been in talks about a possible merger with Time Warners AOL unit. Two weeks ago, it began a test to outsource some of its search ads to Google, whose advertising technology allows it to earn more revenue for each search on average than Yahoo.[13]
A partnership to test Google's search ads alongside Yahoo's search results, a move that could increase the revenue per click that advertisers pay Yahoo.[18]
Analyst estimates accord 9 cents to Google for each ad clicked to 4 cents at Yahoo, so a partnership could be financially important. Yahoo lost an opportunity to seize the initiative by rebutting Microsoft Chief Executive Steve Ballmer's latest take on the acquisition : "I wish Yahoo all the success with its results, but it doesn't affect the value of Yahoo to Microsoft."[18]
Advertisers' budgets may fall, but we believe the compelling ROI of online ads compared to other media may cushion the impact on our industry." The strategy spelled out by Yahoo President Susan Decker this afternoon may be gaining traction -- or more accurately, the "gaining" part may have been three months ago, and the traction could be turning into acceleration. Yahoo remains the Web's principal destination, and the company's strategy is now based around accentuating the value of that destination while distinguishing the functionality of its search capabilities against Google's.[12] CFO Blake Jorgensen said Yahoo continued to see softness in financial, travel and retail advertising during the quarter. Telecom and technology remain very strong on display side, he said. Execs from both Yahoo and Google have expressed optimism that the troubled economy's impact would be cushioned by online advertising's measurability. Decker, meanwhile, said Yahoo had seen demand shift away from guaranteed (premium) inventory to non-guaranteed (remnant) inventory, part of the reason the company has accelerated its AMP platform development. She said the company had redeployed key talent from Yahoo and its Right Media and Blue Lithium acquisitions to the project during the latter part of 2007.[7] Mahaney isn't saying that lightly, citing Yahoo's 19 percent year-over-year growth in display advertising in each of the last two quarters, which mirrors the company's display share, according to ComScore. He said he expects new inventory from acquisitions such as Rivals.com, the application of Right Media and Blue Lithium ad networks to sell Yahoo inventory, the company's integration of display and search sales, and a renewed focus on monetizing nonpremium inventory to bolster Yahoo.[8]
The company has announced or released more products in the last few months than it has in several quarters. While these products are not currently material to earnings, they demonstrate Yahoo's direction on winning new users and making money from the Web in Googlelike fashion. In addition to purchases such as video ad platform Maven Networks and Web analytics company IndexTools, Yahoo introduced O neConnect, a mobile communications suite that synchronizes users' social networks, e-mail, instant messaging and text messaging platforms.[8]
Yahoo's board has since rejected the offer, believing it "substantially undervalues" the company. Mr. Yang addressed the bid on the earnings call, saying Yahoo has accelerated its innovation and gained traction in 2007 and believes that will continue.[15] Mr. Yang said the offer undervalues Yahoo'''s assets and that the board'''s rejection of the offer reflects the company'''s inherent strengths. He said the company has been pursuing strategic options, including the Microsoft offer, to maximize shareholder value.[3] If Yahoo has a fine quarter, it could ratchet up the value of the company, which has resisted Microsoft's offer, claiming the $43 billion undervalues it.[8] The Jan.31 offer was initially valued at $44.6 billion or $31 a share, representing a 62 percent premium over Yahoos value on that day. Following a decline in Microsofts shares, its value has fallen to about $43 billion.[13]
Yahoo's financial results didn't carry an implicit conclusion, either. They weren't so bad that Microsoft's attempt to acquire Yahoo for $31 a share looks generous or so great that Yahoo shareholders will laugh off their suitor.[18] "The results, being neither fish nor fowl, presented a pretty clear outcome," said Gartner analyst Allen Weiner. "I think they're at that critical juncture where the best shareholder value they can give people is the $31 per share Microsoft has offered."[18]
Analysts polled by Thomson Financial had forecast earnings of $.09 per share.[3]
Net income, excluding special items, came in at $150 million, or $.11 per share, versus $154 million, or $.11 in the year-ago period.[3] Yahoo said that net income rose to $542 million, or 37 cents a share, from $142 million or 10 cents a year earlier.[13]
Oh, things were so different when Google went public during the summer of 2004. Yahoo! was still the leader, and Google was the company that wanted to fetch as much as $135 a stub for its IPO, but had to settle for just $85 a share as a result of investor apathy.[17]
You can already see that in the new Yahoo Buzz. Unlike Digg, where users submit stories for other people to vote on, Buzz offers its users the chance to express opinions about stories from a handpicked list of about 100 publishers. It's true that limiting its starting point to sites with which it has business deals will "simplify users' lives," although I'm not so sure that sort of simplification will win a lot of converts from Google. Yahoo clearly will benefit, because Ms. Decker is simplifying and clarifying her description of what she wants the company to do.[19] What of Yahoo's controversial advertising plan with Google ? Yahoo has "narrowed the search monetization gap" with things like the Google deal, said Sue Decker, Yahoo's president. It is "premature" however to speculate bout what other options Yahoo might pursue with Google, she said.[11]
While Yahoo is seeking a business partnership with Google, unlike the outright merger that Microsoft wants, legal experts say any deal between the world's two largest Internet search services will draw heavy scrutiny from U.S. and European competition regulators.[16] Microsoft paid $6 billion for aQuantive, Yahoo bought BlueLithium for $300 million and Time Warner Inc's AOL unit bought Tacoda for an undisclosed amount. Gregory Sidak, founder of the economic consulting firm Criterion Economics, said U.S. regulators are likely to view the tech market as so dynamic and fast-changing that they will abstain from blocking any particular deal or joint venture in what appears to be an ultra-competitive industry. European regulators are generally more likely to act to block mergers than their U.S. counterparts.[16] To counter that dominance, Microsoft offered in January to buy Yahoo in a cash-and-stock deal now valued at $42 billion.[16]
The research company said Microsoft's offer will continue to float Yahoo's stock price, which was $28.69 in trading early April 22.[8] "We anticipate an in-line quarter and further believe that the stock price will continue to be supported near-term because of the Microsoft bid," wrote Citi analyst Mark Mahaney. Mahaney said Google's own Q1 success and Microsoft's commitment to buying Yahoo pegs the company "as one of the best defensive plays in the Internet sector in this recessionary environment."[8] "The quarter's results underscore the fact that our strategy and investments are beginning to pay off," said CEO Jerry Yang. The results, he claimed, were "more remarkable" because they came despite a harsh economic environment and uncertainties stemming from Microsoft's announcement Feb. 1 that it would launch an unsolicited bid for Yahoo.[15] "As outlined in our investor presentation, we believe we can significantly accelerate our revenue growth, return to our historically high margins, and double our operating cash flow by 2010," the Yahoo chief executive, Jerry Yang, said in a statement. "This quarters solid performance underscores the fact that we are executing on that plan."[13] Incidentally, the biggest improvement came from Yahoo's owned-and-operated sites, where marketing-services revenue rose 18% to $966 million; marketing-services revenue on Yahoo's affiliate sites decreased 7%. Yahoo executives admitted to some weakness in both search and display in the financial, travel and retail categories, with slower growth rates and, in some cases, modest declines. They asserted, other categories' growth has made up for it.[15]
Two days later, a letter from Redmond arrived with an offer that Yahoo is still working hard to refuse. Today, Yahoo's call might not have been a model for inspiration, and there was a lot to roll your eyes at as executives praised financial results that trailed far behind those of Google on most every metric.[19] Update: Yang practically confirmed as much on the call in a brief discussion of the Microsoft proposal. Although he noted that Yahoo rejected Microsoft's initial offer, he said "our board and management continue to be open to any and all options, including a sale to Microsoft."[10] "Our board and management team continue to be open to any and all alternatives, including a sale to Microsoft," Yang told analysts.[12]
"Our board and management team continue to be open to any and all alternatives," including a deal with Microsoft.[14]
Current headcount is 13,800 - down from 14,300 in Q4 2007, though Yahoo! added 600 new jobs, said CFO Blake Jorgensen. Microsoft CEO Steve Ballmer reportedly doesn't care what Yahoo says during its call, while News Corp. chief Rupert Murdoch is open to a joint Microsoft-News Corp. bid for Yahoo. [11] Yahoo gave passing mention to the test but said, in effect, "Stay tuned." Given that Yang had no big news to announce, he had to walk a fine line on the conference call. He didn't want to throw in the towel to Microsoft, and he couldn't declare that Yahoo now has got Google running scared.[18] Google has objected to Microsoft buying Yahoo! and in response to the news of the AdSense test programme, Microsoft has objected on the grounds of anti-competitive behaviour, according to reports.[6]
Obviously Microsoft understands that.''' Both Yahoo and Microsoft are struggling to contain the online advertising dominance of Google, which Mr. Becker terms '''an innovation machine.'''[3] While Google dominates search, Yahoo argues the market for online display ads - the splashy banners or video ads that companies love - is so fragmented that Yahoo is the biggest player with just 8 per cent of the market.[16] The company is adding to capabilities in video, mobile, search, and display ads. "We've come from behind and closed the relevancy gap," she said. Citing various statistics, she added, "These are the most material gains in key numerical indicators. since five years ago." The launch of Flickr video earlier this month already "quadrupled video uploads by users across the entire Yahoo network," Decker said.[14] I was impressed, especially by the section where Ms. Decker, the company's president, outlined Yahoo's strategy. It is still arranged around two buzzwords: being a "starting point" for Internet users and being a "must buy" for advertisers. What Ms. Decker said that Yahoo plans to do within those strategies was much more sharply defined, and plausible.[19]
The rise of cheap "non-guaranteed" advertising space has dragged down Yahoo's revenue, Ms. Decker said. I wonder if there is a bit of a conflict between these two strategies.[19]
Google is now commanding about three times the revenue of Yahoo!, with an even wider discrepancy on the bottom line. This isn't to say that Yahoo! has been driving in reverse since the Google IPO. Yahoo! revenue in 2007 was nearly double what the company rang up in 2004.[17] Perhaps at around the same time, expect to see personalization features added to Yahoo's home page, similar in concept to iGoogle, and likely with an open, XML-based API as well. There was only one allusion this afternoon to Yahoo's utilization of Google's tools -- or maybe more than just its tools -- and Decker was very pointed with her language here. Referring to Yahoo playing catch-up with Google in the search space, she said, "We've narrowed the search monetization gap, and plan to continue closing it.[12]
Welcome to the week that Yahoo! (Nasdaq: YHOO ) has been dreading. With Google's (Nasdaq: GOOG ) blowout results on Thursday, it's not just about Big G being a hard act to follow. With the fate -- or at the very least the direction -- of Microhoo hanging in the balance, tomorrow's quarterly report out of Yahoo! is this year's second most-anticipated sequel after Indiana Jones. It's not an easy question to answer. Yahoo! has been growing slower than its now-larger rival since Google went public nearly four years ago. It doesn't get any prettier on the way to the bottom line, where Yahoo! earnings have clocked in flat or lower in each of the past four quarters.[17] Last week, Google reported results that beat analysts forecasts, raising expectations that Yahoo would do so as well.[13] The following is a record of a live report of Yahoo's conference call with financial analysts discussing the company's first-quarter results.[14] Just as there are consequences for saying something injudicious on the conference call, there are consequences to playing it too straight. If it wants to fend off Microsoft, Yahoo has to prove to its shareholders that its alternatives are real.[18] Yahoo has been busy exploring alternatives to remain independent, or to extract a higher offer from Microsoft.[13] Ballmer has said if the Saturday deadline for a negotiated merger agreement is not met, Microsoft would begin a proxy fight to oust the Yahoo board. Ballmer also said that Microsoft would take its buyout offer directly to shareholders, likely at a lower price.[13] "After a careful evaluation, our board of directors determined that Microsoft's offer substantially undervalues Yahoo.[11]
Yahoos board has twice rejected Microsofts unsolicited bid saying it undervalued the company.[13] Yahoo did just well enough in the first quarter for it to be able to hold its head up high as it tries to justify its continued rejection of Microsoft's hostile bid.[19] Yahoo Inc's attempt to form an alliance with Google Inc to stave off Microsoft Corp could run into more trouble with antitrust regulators than Microsoft's unwelcome takeover bid.[16] The strong showing should help the company contend with a looming proxy takeover bid by Microsoft.[7]
The Web company struggles to decide whether it could remain independent or must surrender to an unsolicited takeover by Microsoft Corp.[16]
As desperate as Microsoft may be to compete against Google in the high-margin arena of paid search, investors will revolt if Microsoft is overpaying for a company in decline.[17] Google Outsourcing : Decker says company sees tremendous value in being a significant player in search and display[9]
Yang said that the company is still "exploring a number of strategic alternatives." He didn't say Yahoo didn't want to sell itself, saying merely that the board and management are committed to choosing whatever option maximizes shareholder value. Adding to the sense that this was mostly bargaining for a higher price, he said the company "will not enter into any transaction that does not recognize the full value (of Yahoo)."[10] Microsoft has already begun to play down any possible upside from Yahoos results. "I wish Yahoo all the success with its results but it doesnt affect the value of Yahoo to Microsoft," Ballmer said Tuesday in Morocco, according to Reuters.[13] The results, which come just five days before a deadline Microsoft imposed for the two companies to reach a negotiated merger agreement, are certain to become ammunition in a public battle over Yahoos valuation.[13]
Robert Becker, an analyst at Argus Research, said a solid quarter would give Yahoo greater leverage. '''The ramifications are pretty clear,''' he said. '''The better Yahoo'''s numbers are, the better their negotiating position with Microsoft.[3] Microsoft reports April 24, but Yahoo is top of mind today for financial analysts. Here's why: Most experts agree at this point that Microsoft will succeed in its quest to buy Yahoo, but it is difficult to play Nostradamus on the price.[8]
Longtime Fool contributor Rick Munarriz is a fan of Yahoo! and Microsoft but not of bad weddings. He''does not own shares in any of the stocks in this story.[17] Trading in Yahoo stock was flat Tuesday, with shares falling $.01, or.04 percent, to $28.54.[3] Back when Yahoo! was trading in the high teens, it had a mattress of cash and stakes in Asian investments like Yahoo! Japan, Gmarket (Nasdaq: GMKT ), and Alibaba Group worth nearly $12 a share.[17] In after-hours trading, Yahoo shares slipped $.19, or.67 percent, to $28.36 as of 5:20 p.m. Eastern time.[3]
For first-quarter 2008, net income notched $542.2 million, or 37 cents a share, up from $142.4 million, or 10 cents a share, in first quarter 2007.[15]
The company also forecast second quarter revenue of $1.73 billion to $1.93 billion, well above the consensus analyst forecast of $1.37 billion.[3] Net revenue, which excludes commissions paid to marketing partners, grew 14 percent percent to $1.35 billion, slightly higher than the $1.32 billion forecast by analysts.[13]
Marketing-services revenue was $1.57 billion, a 7% increase over the same period the prior year.[15]
In February, Microsoft made an unsolicited $44.6 billion stock and cash offer.[3]
The goal remains the same: to be a significant player in search, and optimize near-term monetization as one important way to create stockholder value." That term "stockholder value" came up just one other time -- earlier, during CEO Jerry Yang's comments, with respect to its options with Microsoft.[12] CEO Jerry Yang said the upbeat results were all the more astonishing in light of the Microsoft situation and the nation's economic hardships.[7]
In January, I called the effort by Jerry Yang and Sue Decker to justify the company's weak performance a "droning, jargon-filled" explication of a "vision-goes-here strategy."[19]
"I think any company contemplating a merger or acquisition would want to get it through during the Bush administration," said Sidak, expressing a commonly held view in the legal community that, even if Republican nominee John McCain wins the 2008 election, there will be stricter controls. "Even if McCain is elected, I think there's reason to believe they'll be some tightening of antitrust enforcement," he said. Evan Stewart of law firm Spaeder Zuckerman LLP predicted that, when the dust settled on the various deal scenarios, Yahoo would lose its fight to stay independent, a view widely shared among Wall Street investors betting on the outcome. There are "very creative investment bankers providing Yahoo with all these very different end-games," he said. [16] NEW YORK (AdAge.com) -- Yahoo's first-quarter earnings were good enough to trump Wall Street estimates. Now the question is whether they're good enough to get Steve Ballmer & Co. to bump the price they're willing to pay for Yahoo.[15]
"The Justice Department would certainly want to take a serious look at that because it would mean that a firm that would want to take advertisements or to place advertisements (online) would have only one place to go," said Aaron Edlin, who teaches law and economics at the University of California at Berkeley. In recent years, Web search services have taken over from once popular portals or home pages, such as AOL, MSN or Yahoo's own home page, as the primary starting point for many consumers seeking information on the Internet.[16] "We're very pleased where we stand on click yield," which is ad coverage times click-through rate. The relative weakness hit both display and search ads. On the flip side, both types also stand to gain from online advantages, she said: "There are strong return-on-investment components that are very measurable in both search and display." Advertisers can measure bang for their buck. Paid clicks are a very important measurement for search ads, both in terms of relevance and as a way to actually generate revenue.[14] There was "some softening" in finance, travel, and retail. Of online advertising in general, he said: "Advertisers' budgets may fall, but we believe the return on investment of online ads compared to other media may cushion the impact on our industry." That includes 600 new hires, offset by the company's layoff. "There is still upward pressure on TAC rates and (what we) pay partners as the competitive dynamics get more difficult," he said.[14]
Sharing some preliminary results from the Google ad test could have helped advance the discussion about just how real some of the company's alternatives are.[18]
Yahoo executives outlined a more sharply defined and plausible strategy for competing with Google.[19] Yahoo shelled out $29 million on severance packages and other expenses relating to the several hundred layoffs that occurred in January.[11] Yahoo also spent $166 million to acquire Maven Networks and Foxy Tunes.[11]
Yahoo has a unique and valuable combination of assets that include our global brand, large worldwide audience, our leadership in online advertising, strategic position in Asia, emerging mobile markets,. tools and technology. [11] Of course, Yahoo is not in reality keeping the online ad world limited to the old country club set. It owns the Blue Lithium ad network, and the Right Media exchange, which is the most active pork-belly pit for cheap online ads. At least Yahoo can say to publishers that it feels their pain.[19]
Can Yahoo really be the most open starting point for Web users if it also wants to help bolster old-guard companies.[19] "Our next major advance is open search," she told analysts, "which we call 'Search Monkey.' Later in Q2, we will open the search user interface to developers and give them the opportunity to innovate right on top of our search technology. Users will soon enjoy search results as rich and dynamic as businesses and the community of developers can make them."[12] "We are watching the economy a lot more than the Microsoft uncertainty. It's hard to say (there was) any impact." We'll close by mixing two of his earlier metaphors: "Our results this quarter demonstrate we are on the right track. We are pursuing the right strategy and it's beginning to bear fruit."[14] Chief Financial Officer Blake Jorgensen said, as previously predicted in January, that the company had seen weakness in financial services, travel and retail advertising sales related to the U.S. economic weakness during the first quarter.[5]
Decker: Yahoo is "on the verge of fundamentally changing the game" in the display-ad business. [14] Yang: "While we believe in search, our largest opportunity is in display. We have positioned ourselves to gain share in this huge opportunity."[14] Attend the upcoming launch of three powerful new products, take a test drive, meet the teams, and leave with promotional copies of Windows Server' 2008, Microsoft' SQL Server' 2008, and Microsoft Visual Studio' 2008.[8]
SOURCES
1. Yahoo CEO open to any and all deal alternatives | Reuters
2. Yahoo! open to all offers including Microsoft - Telegraph
3. Yahoo Beats the Street
4. For Yahoo, clock ticks down to Microsoft deadline | Special Coverage | Reuters
5. CEO says aiming to maximize value of Yahoo assets | Technology | Internet | Reuters
6. :: AdWorld :: news ::
7. Yahoo Q1 Earnings Rise, Yang Hails Display Ad Future - ClickZ
8. Yahoo Needs Google Magic for Q1
9. Earnings: Yahoo Call: Yang Claims Results 'Remarkable'; Open To Microsoft; Google Spec Premature - washingtonpost.com
10. Yahoo report filled with Microsoft subtext | Beyond Binary - A blog by Ina Fried - CNET News.com
11. Jerry Yang: Yahoo Still Open to Microsoft Bid - AppScout
12. BetaNews | What recession? Yahoo shows signs of a complete resurgence
13. Yahoo profit tops expectations - International Herald Tribune
14. Yahoo earnings live blog | Tech news blog - CNET News.com
15. India media news marketing India advertising Indian brands tv media newspapers
16. Higher antitrust bar for Yahoo-Google- Hindustan Times
17. Raiders of the Lost Yahoo!
18. Yahoo sidesteps the big questions | Tech news blog - CNET News.com
19. Yahoo'''s Starting Point: A Clearer Strategy - Bits - Technology - New York Times Blog
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