14 DAY TRIAL // Yahoo's fourth quarter financial report paints a spotted picture. Net income and other figures were above estimates, but declining revenue and some poorer performing metrics dragged down Yahoo stock price after the announcement. Net income more than doubled from the previous year, but revenue dropped four percent.
"We just completed a very encouraging quarter and year for Yahoo!, where we saw our plans to turn around the company gain momentum," Carol Bartz, CEO of Yahoo, said.
"For the year, operating income, margins, EPS, and return on invested capital doubled. Display advertising grew 17%. We completed the important North America Search transition to Microsoft on schedule and with high quality," she added.
Gross revenue in the fourth quarter of 2010 at Yahoo dropped 12 percent, from $1.73 billion to $1.53 billion. However, revenue excluding traffic acquisition costs dropped only four percent, from $1.258 billion in Q4 2009 to $1.205 billion this year.
Both gross revenue and net revenue were ahead of market expectations, with analysts betting on $1.5 billion and $1.19 billion respectively.
The Microsoft search deal went into effect this year, in August in the US and later in Canada. Yahoo now splits search revenue with Microsoft, contributing to the sharp drop in search ad dollars. However, the deal also contributed to a drop in costs, partly explaining the increasing profits.
Net income was $312 million, up from $153 million in Q4 2009, an 104 percent increase. Earnings per share were also ahead of expectations at 24 cents per share compared to the estimated 22 cents per share. Yearly net income doubled in 2010, reaching $1.24 billion versus $605 million in 2009.
Yahoo has been making big strides to drive up profitability, with noticeable results. It has been outsourcing many of its products including search to Microsoft. It has sold some properties or closed down others, as well.
It's also reducing headcount, all of these factors contributing to the impressive net income increase. However, revenue has been dropping for nine consecutive quarters.