Yahoo, the leading provider of online display advertising, said on Tuesday it planned to cut at least another 10 percent of its roughly 15,000-strong global work force, and reduce its expense-run rate by around $400 million by the end of 2008.
The planned job cuts of more than 1,500 employees expand an earlier cut of roughly 1,000 jobs, or 7 percent, that Yahoo made in February. Chief Financial Officer Blake Jorgensen said Yahoo was prepared to further cut jobs and other expenses in 2009 if the economy continues to deteriorate.
Yahoo is cutting its work force in high-cost markets and hiring aggressively in lower-cost locales such as Eastern Europe, India and Southeast Asia.
"The stock is up," Cowen & Co analyst Jim Friedland said. "It's not up on better-than-expected results. It's up on a lack of a complete meltdown in the business," he said.
The Silicon Valley-based Web pioneer said net income for the third quarter tumbled to $54.3 million, or 4 cents per diluted share, from $151 million, or 11 cents per diluted share.
Gross revenue, including payments to affiliated websites that carry Yahoo ads, edged up 1 percent to $1.79 billion. Net revenue was $1.325 billion, compared with the average Wall Street estimate of $1.37 billion, according to Reuters Estimates.
Wall Street was looking for a profit, on average, of 8 cents per share, according to Reuters Estimates. Net revenue forecasts had ranged from $1.29 billion to $1.43 billion, the same data showed.
Yahoo President Susan Decker said the company struggled as corporate brand advertisers scaled back spending on Web marketing promotions, not only in the United States but also across Europe and Asia. Marketers in the travel and retail industries have been canceling some contracts, she said.
"We are still seeing a weakening trend in some Asian markets," Decker said.
Yahoo co-founder and Chief Executive Jerry Yang put a brave face on the situation, saying that while its premium display advertising business was declining, Yahoo appeared to be gaining market share as buyers consolidated their spending.
"I am encouraged that most advertisers who are still spending in this environment are spending with Yahoo," Yang said.
GLOOMY OUTLOOK, NARROWING OPTIONS
Yahoo forecast fourth-quarter gross revenue at between $1.773 billion and $1.973 billion. That represents a decline of 3 percent to a modest growth of 8 percent from the year-earlier quarter's $1.83 billion.
"I had been predicting they would reduce their guidance for (the fourth quarter) but they really whacked it," said Martin Pyykkonen, an analyst with Wunderlich Securities.
"It had been in the mid-teens, now it's just barely over 2 percent for revenue growth in the fourth quarter, normally a seasonally strong one," he said, referring to the midpoint of the percentage growth Yahoo has forecast.
Shares of Yahoo gained 7.7 percent to $13 in extended trade on the results, after closing 6.1 percent lower at $12.07 on Nasdaq. But despite the rebound, the stock remains at 5-year lows as hopes earlier this year that Microsoft might acquire Yahoo for $33 or more per share have dissipated for now.
Free cash flow fell to $215 million from $231 million in the 2008 second quarter and $310 million in the year-earlier quarter.
Analysts said that while the latest downturn in Yahoo's business has forced the Sunnyvale, California-based company to make sweeping cutbacks, these cuts are likely to further damage its competitiveness with Internet market leader Google.
"They don't have much of a choice, but it's likely to hurt Yahoo's longer-term growth," Friedland said.
Excluding one-time items such as the costs of fending off a proxy campaign by Carl Icahn to force Yahoo back into talks with Microsoft Corp on a possible merger, quarterly profit rose to $123 million, or 9 cents a diluted share.
For the September quarter, the company said it ran up $36 million in merger, consulting and legal costs related to its on-again, off-again talks with Microsoft, an aborted proxy fight with activist investor Carl Icahn, and its bid to win regulatory approval for an ad sales deal with Google Inc.
Icahn subsequently joined the Yahoo board.
Yahoo and Google recently agreed to delay their advertising deal amid competitive concerns by the U.S. Justice Department but Yang.