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Yahoo beat Q1 estimates, but still faces questions about the future

Iconic tech company Yahoo‘s first quarter 2012 revenue saw a slight one percent increase compared to the same period last year, beating Wall Street’s estimates, according to the company’s quarterly earnings report.

But the earnings numbers are largely overshadowed by the company’s current strategy set forth by newly appointed CEO Scott Thompson.

Yahoo has suffered a great deal of turmoil over the past few years. Board members fired long-time CEO Carol Bartz in September 2011 as punishment for failing to increase revenues, as well as significantly losing advertising share from Facebook and Google. During her tenure (and prior to it), Yahoo’s products grew stagnant and failed to keep pace with innovation from competitors. Overall the company suffered from a lack of leadership, which is something Thompson was charged with fixing after assuming his post in January.

Thompson set his strategy for turning the company around into motion at the beginning of April by laying off 2,000 employees across all departments. The move was criticized by many due to the lack of details surrounding those plans, which have only vaguely been explained as refocusing all business efforts into three areas: Media, data, and enterprise.

The CEO is expected to explain the strategy in greater detail during the earnings call this afternoon.

As for the numbers, Yahoo’s revenue (excluding traffic acquisition costs) was $1,077 million for the first quarter of 2012, a 1 percent increase from the first quarter of 2011. Income from operations decreased 11 percent to $169 million in the first quarter of 2012, compared to $190 million in the first quarter of 2011. GAAP revenue was $1,221 million for the first quarter of 2012, a 1 percent increase from the first quarter of 2011.

Net earnings per diluted share increased 38 percent to $0.23 in the first quarter of 2012, compared to $0.17 in the first quarter of 2011.

“In the first quarter, Yahoo!’s results came in at the high end of our guidance range and beat consensus on revenue and profits,” Thompson stated in the earnings report. “We also made changes to resize the organization and establish a new leadership structure to quickly deliver the best user and advertiser experiences at scale.”

From the Q1 2012 earnings report:

Business Highlights

  • Yahoo! established a new leadership structure, organizing into three main groups — Consumer, Technology and Regions — bringing resources closer to users and advertisers.
  • Yahoo! is home to 11 number one properties and ranks in the top three in 21 categories in the U.S. (comScore, U.S., March 2012)
  • Yahoo!’s worldwide visitors during January and February grew 7 percent year over year with minutes spent increasing 14 percent in communications and communities and 8 percent in media properties. (based on comScore, Worldwide data)
  • Yahoo! debuted a variety of original comedy Web shows as a part of a collaborative effort between Yahoo! and top-tier production partners. New shows include “First Dates With Toby Harris” featuring Seth Morris (Funny or Die);
    “Sketchy” (Electus/Principato-Young Entertainment), and “7 Minutes in Heaven” with “Saturday Night Live” writer Mike O’Brien (Broadway Video).
  • Yahoo! also debuted the new ABC-produced daily series, “Power Players,” on Yahoo! News, featuring an ABC and Yahoo! News analyst team, and “Remake America,” a new weekly video series that follows the lives of six real families as they strive to get back on track towards achieving “the American dream.”
  • Yahoo! announced the implementation of a Do Not Track (DNT) header solution that will be accessible across Yahoo!’s global network by early summer.
  • The Yahoo! Board appointed five new independent directors: Alfred Amoroso, former President and CEO of Rovi Corporation; John D. Hayes, Executive Vice President and Chief Marketing Officer of American Express Company; Peter Liguori, former Chief Operating Officer of Discovery Communications, Inc. and former Chairman and President of Entertainment of Fox Broadcasting Company; Thomas J. McInerney, former Chief Financial Officer of IAC/InterActiveCorp; and Maynard Webb, Chairman of LiveOps, Inc.
  • To protect the investments of Yahoo! and the inventions of its employees, Yahoo! sued Facebook for
    patents. Yahoo! has invested substantial resources over many years to innovate and earn this intellectual property and the lawsuit is intended to enforce Yahoo!’s rights.

First Quarter 2012 Revenue Highlights

  • Display revenue ex-TAC was $454 million, a 4 percent decrease compared to $471 million for the first quarter of 2011.
  • GAAP display revenue was $511 million, a 2 percent decrease compared to $523 million for the first quarter of 2011.
  • Search revenue ex-TAC was $384 million, an 8 percent increase compared to $357 million for the first quarter of 2011.
  • GAAP search revenue was $470 million, a 3 percent increase compared to $455 million for the first quarter of 2011.Cash Flow and Cash Balance
  • Cash flow from operating activities for the first quarter of 2012 was $297 million, a 45 percent increase compared to $206 million for the same period of 2011.
  • Free cash flow was $196 million for the first quarter of 2012, a 247 percent increase compared to $56 million for the same period of 2011.
  • Cash, cash equivalents, and investments in marketable debt securities were $2,652 million at March 31, 2012 compared to $2,530 million at December 31, 2011, an increase of $122 million.
  • During the first quarter of 2012, Yahoo! repurchased 5 million shares for $71 million.

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