Yahoo warns of weak Q1, more cost cuts planned

SAN FRANCISCO Tue Jan 25, 2011 5:29pm EST

A Yahoo billboard is seen in New York's Times Square October 19, 2010. REUTERS/Brendan McDermid

A Yahoo billboard is seen in New York's Times Square October 19, 2010.

Credit: Reuters/Brendan McDermid

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SAN FRANCISCO (Reuters) - Yahoo Inc warned revenue will again slide this quarter as traffic to the Internet portal drifts elsewhere and the company begins sharing search revenue with Microsoft Corp followed that with a declaration it is preparing its biggest year of hiring ever in 2011.

Yahoo has struggled to contain costs and jumpstart revenue growth while bleeding traffic to competitors such as Google and Facebook. It now ties up with Microsoft on search, hoping to keep a lid on expenses.

The company reported its third consecutive quarter of declining page views on its websites two years into the tenure of CEO Carol Bartz, who took over to try to revive its fortunes.

In October, Yahoo began outsourcing its search advertising service in the United States and Canada to Microsoft, in keeping with the 10-year search partnership the two sealed in 2009. Under the terms of the deal, Yahoo will share 12 percent of its search advertising revenue with Microsoft.

But Chief Financial Officer Tim Morse said Facebook competition was not hurting Yahoo's display advertising business.

"All impressions aren't created equal. With the big customers and branded advertisers, and the premium dollars being spent, we really aren't seeing that kind of competition," he said in an interview with Reuters.

MORE COSTS TARGETED

Morse told Reuters after Tuesday's financial results were released that there were still more costs to come out of Yahoo in coming years.

Asked if that meant additional layoffs, Morse said: "Over the next few years, there will definitely be some more people who leave, there will be more people who are hired."

Net revenue, which excludes revenue shared with website partners, totaled $1.2 billion in the three months ended December 31, compared with $1.26 billion in the year ago period. Analysts polled by Thomson Reuters I/B/E/S were looking for $1.19 billion in net revenue.

And it projected that net revenue in the first quarter will range between $1.02 billion and $1.08 billion, compared with the $1.13 billion expected by analysts.

Its fourth-quarter earnings also lagged targets.

Yahoo said its net income in the fourth quarter was $312 million, or 24 cents a share, compared with $153 million, or 11 cents a share in the year ago period. Analysts polled by Thomson Reuters I/B/E/S were looking for 22 cents a share.

Yahoo shares were down at $15.53 in extended trading after closing out the regular session at $16.02.

(Reporting by Alexei Oreskovic; editing by Andre Grenon)

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