Yahoo Inc, owner of the most visited US website, said fourth-quarter profit fell 23 per cent after customers switched to Google Inc for online searches and a slowing economy weighed on internet advertising. Net income dropped to $205.7 million, or 15 cents a share, from $268.7 million, or 19 cents, a year earlier, the California-based company said yesterday in a statement.
Excluding revenue passed on to partner sites, sales rose 14 per cent to $1.4 billion, compared with analysts' estimates of $1.41 billion. Yahoo's failure to crack Google's dominance has contributed to eight consecutive quarters of declining profit and three years of slowing sales growth. If the US economy slumps, Yahoo will be dealt a bigger blow than Google, said Colin Gillis, an analyst at Canaccord Adams in New York.
Advertising on Google may be seen as a safer bet during a slowdown, he said. Yahoo is "more at risk in a recessionary environment," said Gillis, who recommends hanging on to the company's shares. Yahoo fell $1.49, or 7.2 per cent, to $19.32 in extended trading after closing at $20.81 on the Nasdaq. The shares, which have tumbled 25 per cent in the past year, are near their lowest level since 2003. Yahoo forecast first-quarter sales, excluding traffic-acquisition costs, of $1.28 billion to $1.38 billion, compared with analysts' average estimate of $1.38 billion, according to a Bloomberg survey. Traffic-acquisition costs are the sales that Yahoo passes along to partners to use its ad technology.
The company also may announce about 700 job cuts, 5 per cent of the staff, a person with knowledge of the plans said last week. Yahoo employs about 600 at its Irish operations in Dublin's East Point Business Park.
Higher energy costs and a housing slump dragged down US consumer confidence in January. That may prompt some Yahoo advertisers to cut back. Yahoo's investments in online advertising, which accounts for most of its $6.5 billion in annual sales, have failed to stem market share losses to Google. Yahoo upgraded its search service in October. Still, Google's share of US queries climbed to 56 per cent in December from 54 per cent three months earlier. Yahoo fell to 18 per cent from 20 per cent. Google had $13.1 billion in cash, at the end of September, compared with $2.8 billion for Yahoo. Chief executive Jerry Yang's plan to boost sales by offering services for phones and social-networking websites may founder from a lack of money. - (Bloomberg)
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