Yahoo Tops Analysts’ Estimates After Cutting Expenses

Yahoo Tops Analysts’ Estimates After Cutting Expenses

Oct. 20 (Bloomberg) -- Yahoo! Inc., owner of the No. 2 U.S. search engine, reported an increase in third-quarter profit after cutting costs by paring jobs and jettisoning businesses. The shares rose 3 percent in extended trading.

Net income attributable to Yahoo more than tripled to $186.1 million, or 13 cents a share, from $54.3 million, or 4 cents, a year earlier, Yahoo said today in a statement. Sales, excluding fees passed on to partner sites, were $1.13 billion. Analysts in a Bloomberg survey had estimated $1.12 billion.

Yahoo, facing slumping advertising revenue and mounting competition from Google Inc., has closed Web sites and refocused on its home page, messaging and mobile services. It also plans to phase out its search engine in favor of Microsoft Corp.’s Bing. Chief Executive Officer Carol Bartz, who took the reins in January, is now resuming some spending, including a marketing campaign costing more than $100 million.

“They’ve done an OK job on cost cutting,” said Hamilton Faber, an analyst with Atlantic Equities LLP in London. He has a neutral rating on the stock, which he doesn’t own. Bartz and her executive team have “a history of strong cost controls and management.”

Yahoo, based in Sunnyvale, California, rose 51 cents to $17.68 in late trading after the earnings were released. The shares, up 41 percent this year, closed at $17.17 on the Nasdaq Stock Market.

Earnings Estimate

Excluding some expenses, profit was 15 cents a share. Analysts had predicted 13 cents, according to the Bloomberg survey.

Gross sales, including revenue from partner sites, will be $1.6 billion to $1.7 billion in the current quarter, Yahoo said. Clayton Moran, an analyst with Benchmark Co. in Boca Raton, Florida, had predicted $1.53 billion.

“Our markets are starting to stabilize,” Timothy Morse, Yahoo’s chief financial officer, said in an interview. “We delivered a solid quarter.”

The U.S. online ad market will decline this year, according to EMarketer Inc. The New York-based research firm projects a 2.9 percent drop, compared with an earlier prediction for 4.5 percent growth.

In July, Yahoo and Microsoft forged a search and advertising agreement in a bid to challenge Google’s dominance. Under the partnership, slated to take effect next year, Yahoo will put Bing on its Web sites and split the related advertising with Microsoft.

Offloading Expenses

The deal enables Yahoo to offload costs, such as engineering. The agreement followed about 18 months of on-again, off-again negotiations between the companies.

Yahoo’s U.S. search-market share fell to 18.8 percent in September from 20.1 percent in May, according to ComScore Inc.Microsoft, which unveiled Bing in June, rose to 9.4 percent from 8 percent. Google maintained its dominance with 64.9 percent of the market in September, compared with 65 percent in May.

Yahoo’s global brand-marketing campaign began last month. It uses both online and television advertising to spotlight new features and draw users to the site. Yahoo has redesigned its home page and is improving its e-mail and instant messaging.

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