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Yahoo Q2 ‘07 Earnings

In the first of this week’s big earnings announcements, Yahoo (NASDAQ: YHOO) reported Q2 2007 Financial Results today.

yhoo-chrt-july.jpgLargely as expected, Yahoo met consensus analyst expectations but overall results were, from the first quarter to include revenue from their new Panama advertising platform, unimpressive. Guidance was lowered for the rest of 2007.

For the second quarter, Yahoo earned total revenue excluding Traffic Acquisition Costs (“TAC”) of $1,244m, up 11% over the same period last year but operating income was down 19% to $185m compared to $230m for the same period last year.  Total ad revenue was up 7% to $1.49 billion. Fees for subscription services increased 12% to $212 million.  Free cash flow for quarter was $328 million, an 8 percent decrease compared to $358 million for the same period in 2006.

Amidst concerns from analysts about the threat of competition from both Microsoft and Google in display and search advertising, newly appointed CEO Jerry Yang promised a top to bottom review of the company.  He said Yahoo will be focused on “doing everything we need to do to strengthen our business, capture long-term growth opportunities and create increased value for our shareholders."  He also chastised Wall Street for viewing Yahoo’s performance in more comparative fashion than for its own merits saying “Yahoo is too often defined by the competitive landscape rather than the assets we actually have.”

For full year-ahead guidance, Yahoo lowered its projections and said it expects revenue, excluding TAC, to range from $4.89 billion to $5.19 billion.  In April the company had set the range to be between $4.95 billion to $5.45 billion for 2007.  Consensus analyst expectations had been for revenue of $5.19 billion.  Yahoo also forecast net sales in the third quarter to be in the range of $1.17 billion to $1.31 billion with full-year revenue between $4.89 billion to $5.19 billion;  both well below the midpoint of analysts prior expectations (The consensus among analysts was projected sales of $1.29 billion in the third quarter and $5.18 billion for the year.)

Company president, Sue Decker said in the official written release “over the last several months, we have made considerable progress driving much tighter focus within our core operations to drive growth. This will take time and continued investment, but we are operating with a great sense of urgency….  In order to create meaningful value for shareholders and to drive growth in the future, we will aggressively look at all opportunities to allocate our capital and talent in the most effective ways."

Shares of Yahoo are down nearly 15% since April.  It may take well into 2008 before there is significant improvement with the company’s overall performance.

More detailed press coverage on Yahoo’s finances can be found at:

Yahoo Finance
Google Finance
Official Press Release

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