Yahoo Posts 78% Plunge in Profit, Announces 5% Cut in Work Force

But CEO Bartz Says Company Remains Committed to Display Advertising -- and Search

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NEW YORK ( -- As expected, display-advertising-dependent Yahoo had a tough first quarter -- its profit dropped 78% to $118 million, or 8 cents a share, from $539 million, or 37 cents a share in the same period a year earlier. Overall revenue was down 13% to $1.58 billion and marketing services revenue down 12%.

Carol Bartz
Carol Bartz
Also going down is Yahoo's headcount; the company announced it would cut 5% of its 13,500-person work force over the next several weeks.

But CEO Carol Bartz, who has been at the company for less than four months, cautioned that it's not an across-the-board cut, such as the one Yahoo instituted in December in response to the economy, but rather a "natural outgrowth of the work we're doing to streamline our structure, globalize products, slim our portfolio and eliminate duplications."

Bartz: Normal pain of recession
Yahoo has long touted that its display-advertising inventory is highly valuable for big, brand advertisers that care about putting ads in high-quality, safe places -- and will pay more to do that. But as the economy has struggled, many online ad spenders have shifted their dollars toward more low-end performance-based ad inventory. Ms. Bartz spent much of the earnings call trying to reassure analysts that brand advertising is not dead, but rather is simply undergoing the normal pain of a recession, when marketing is often one of the first areas companies cut.

"Any CMO will tell you that their brand value is not determined by 20 search keywords. ... When a company stops investing in brand building it starts to lose mind share among consumers and then it loses market share," she said.

She said several non-U.S. auto manufacturers have increased their spending in an effort to snag share from domestic competitors. In consumer categories she said Yahoo was seeing differing strategies among some head-to-head competitors, as some are boosting online advertising while others are cutting dramatically. And she said telecom spending among most of the major players was up across the board.

"GM's doing one thing. Toyota's doing another. It depends on their circumstance and it depends, I think, how strong the CMO is vs. the CFO."

In the past week there has been much chatter about renewed talks with Microsoft, which has been trying to persuade Yahoo to do a search deal. The idea is that by combining search assets the two companies will present a stronger competitor to Google. Ms. Bartz made clear on the earnings call she would not address that subject.

Creating 'kick-ass' experiences
"Search is a very valuable business for Yahoo. But that's all we're going to say about search today," she said. She did, however, say she was well-versed enough in the company to be able to make a decision on search. Search "is critical to Yahoo and critical to our partners that they have a combined search and display position on the business. And relative to anything else with Microsoft I have no comment."

Ms. Bartz outlined Yahoo's goal of creating "kick-ass" experiences for consumers and praised several positive signs: Yahoo page views were up 8%, unique visitors to Yahoo's Oscar site tripled and Yahoo announced a new mobile home page earlier this month at the CTIA Wireless Conference. She said its priorities going forward included globalizing Yahoo's platform, building great products on that and creating more efficient advertising platforms.

"We still aren't easy enough to do business with when it comes to buying. The platforms will help focus on marketing ad buying easier," she said. Yahoo will also focus on the ad-operations side, by trying to get ads up faster.

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