Yahoo posts fall in revenue and profit

Yahoo reported revenues of $1.8bn during the quarter ending 31 December

Yahoo has reported a one per cent drop in revenue and a five per cent drop in profit for its fourth quarter, compared to the same period in 2007.

Revenue reached $1.8bn (£1.25bn) during the quarter ending 31 December, while profit reached $1.07bn (£747m).

Yahoo has had a difficult quarter. While the economic downturn has been taking its toll on all businesses, Yahoo's stock has been particularly volatile owing to its resistance to a Microsoft takeover and the collapse of the Google ad deal.

This was followed by Yahoo's renewed interest in a Microsoft deal, its subsequent rebuff by Microsoft chief executive Steve Ballmer, and the replacement of Yahoo chief executive Jerry Yang by Carol Bartz, in whom Wall Street investors have demonstrated little faith.

However, while Yahoo's operating costs increased by $278m (£194m) during the quarter, largely due to restructuring and a hefty goodwill impairment charge, the firm has driven down costs in sales and marketing and product development.

"The company also made important investments while aggressively managing costs, leaving us better positioned to weather the economic downturn and emerge stronger when advertiser spending improves," said Bartz in a statement.

Other significant changes in the quarter since the same time last year were a rise in cash assets by $1.28bn (£895m) and a cancellation of short-term debt.

"With that sort of coin in her pocket, we are going to see if Bartz has some riverboat gambler in her makeup and begins a buying spree of undervalued companies whose add could generate new products and services as well as some much better excitement and buzz," said Gartner analyst Allen Weiner.

Yahoo's revenues also increased overall during the year to $7.2bn (£5.03bn) in 2008, a three per cent increase compared to $6.96bn (£4.86bn) in 2007.

Following the release of the quarterly and full-year earnings, Bartz gave a conference call with press and analysts to discuss the results. But she has been criticised for seeming to be unaware of some of Yahoo's largest profit drivers.

While Bartz discussed most of Yahoo's properties, Weiner was puzzled as to why she made no mention of Yahoo's TV business, which he pointed out was one of the highlights of the CES 2009 show in Las Vegas earlier this month.

"Yahoo stands poised to become a major player in the interactive TV platform business, and [this] was certainly noteworthy," he said.

Meanwhile, Thomas Hawk, chief executive of photo-sharing start-up Zoomr, noted that Bartz also failed to discuss Yahoo's own photo-sharing site, Flickr.

"There were many points in the call that it would have been appropriate for Bartz to mention Flickr, but she didn't," said Hawk in his blog.

Hawk speculated that Bartz's failure to mention Flickr could be due to her lack of awareness of the Yahoo site, pointing out that he could not find a Flickr account owned by Bartz.

Yahoo could not immediately suggest why Bartz failed to mention some of Yahoo's largest assets in the call.