Yahoo Blows Through Expectations

Yahoo (YHOO) released Q1 financials moments ago. Total revenue for the quarter was $1.8 billion. Net Income was $542 million, or $0.37 per share. Gross profit for the quarter was $1,063 million, an 11 percent increase compared to $958 million for the same period of 2007. Compare this to analyst expectations: Q1 net revenues of around $1.33 billion, ebitda of $435 million and EPS of $0.09/share.

Other interesting tidbits:

• Operating income for the first quarter of 2008 was $121 million, a 28 percent decrease compared to $169 million for the same period of 2007.
• Yahoo has spent $14 million to date on outside advisors on the Microsoft deal.
• They took a $29 million charge for severance arrangements.

What does this mean for Yahoo? Probably not much relative to other things going on. A very high percentage of Yahoo’s stock is in the hands of arbitrageurs, who are focused only on whether or not the deal with Microsoft (MSFT) will happen or not, as opposed to the fundamental financial health of the company. They’ll be listening closely to the earnings call at 2 pm PST for messages about the Yahoo search deal with Google. All indications suggest that Yahoo is getting a roughly 100% revenue increase from search queries outsourced to Google.

In the meantime, Microsoft is saying the results are irrelevant to their offer. But if Yahoo signals that they think a long-term Google deal is a real possibility, they may fold, and quickly.

Original post

Comments

[Suraj]

Yahoo! is not outsourcing search to Google at all, the ads displayed on search result pages are coming in from Google's AdWords network. I doubt if Yahoo! plans to exit the search market, that would make no sense at all.

[flatman]

MSFT isn't going to cave in. The yahoos from YHOO could only get 2 cents even when their life depended on it.

[rufusmcbufus]

"Blows through"? Really??? Mr. Market in after hours doesn't seem to think this warrants such a frothy headline.

[Zeninvestor]

Put the SOLD sign on the lawn at Yahoo! MSFT will win because there are no other bidders. This is not a company that wins against Google, even with MSFT, but MSFT can make it work well for their purposes. They have always dreamed of offering software on the web, and Yahoo would give the the base they need to make it work. If not, then Google will in the software business and their earnings will be the 'clouds' with their users. This deal is done. Go close it Mr. Ballmer.