Microsoft Money Helps Yahoo Post Great Financial Results in Q1

Yahoo has posted some better-than-expected results for the first quarter of 2010. While revenue stayed flat, income was more than double mostly due to several one-time deals. Money from Microsoft has started pouring in and display ads, arguably Yahoo’s strong suit, have seen a 20-percent uptake in the first three months of the year.

“We had a good quarter, delivering income from operations higher than our outlook,” Yahoo! Chief Executive Officer Carol Bartz said. “Thanks to our efforts, our search share has stabilized, and we grew display advertising by 20% year over year. More importantly, guaranteed display grew by 24% as advertisers took advantage of the science, art and scale that only Yahoo! can offer.”

Revenue was at $1.597 billion in Q1 2010, a one-percent bump over the previous year. But Yahoo’s efforts to bring down costs seem to be paying off, as it managed to increase its net and operating income by a significant margin. The net income was of $312.3 million, or 22 cents per share, in Q1 2010, up from $118.7 million, or eight cents per share in the previous year. Operating income was of $188 million, up from $101 million.

The inflated income numbers owe a lot to Microsoft. Yahoo received the first part of the $150 million one-time payment for “transition costs,” adding up to $43 million. Another $35 million came from Microsoft in search operating costs as part of the search deal that is starting to come into effect. Microsoft will continue to make payments until the transition to Bing as the underlying technology for Yahoo Search is finished.

The recent sale of the Zimbra email suite to VMware also boosted income. Yahoo’s search share stabilized in March, seeing the first modest rise since Microsoft launched Bing in June. The company believes that this new trend will continue and that its market share will rise in the coming months.