Yahoo Reports: Microsoft-Icahn Saga Cost $22M

The Carl Icahn proxy battle and Microsoft (MSFT) buyout drama appears to have been a slight distraction for Yahoo (YHOO), which seeing slowing display ad demand amid a weak economy.

Yahoo on Tuesday reported second quarter net income of $131 million, or 9 cents a share, on revenue of $1.35 billion excluding traffic acquisition costs. Excluding items, Yahoo had earnings of $139 million, or 10 cents a share.

Estimates appear to be fluid, however. Factset Research had expected earnings of 10 cents a share with Thomson Financial projecting earnings of 12 cents a share. You can chalk the quarter up as a miss, but Wall Street is likely to cut Yahoo a break and focus on the ad outlook and the future without a pricey proxy fight to worry about.

On a conference call with analysts, CEO Jerry Yang said the end of the Icahn proxy battle “eliminates a distraction.” Yang said he was impressed with the company’s ability to perform given the Microsoft-buyout saga and the Icahn flap. “We delivered two quarters in line with our strategic plan,” said Yang.

Yang also noted that Yahoo is open to shareholder value enhancing deals. He also touted Yahoo’s page view growth, a growing user base and the company’s ad network. He did note that the economy is becoming a display ad headwind. “In some categories we saw demand for CPG (consumer packaged goods) and finance soften,” said Yang.

Sue Decker, president of Yahoo, touted the company’s search enhancements, efforts like BOSS and SearchMonkey to show it has the capital and chops to compete. She added that search revenue should accelerate in the second half of the year.

As for the outlook, Yahoo in a statement projected revenue for the third quarter of $1.78 billion to $1.98 billion with income from operations of $65 billion to $85 billion. For 2008, Yahoo is projecting revenue of $7.35 billion to $7.85 billion. The revenue outlook doesn’t exclude traffic acquisition costs.

But so far Yahoo’s business is flattish.

 

By the numbers:

• Marketing services revenue was $1.58 billion, up 7 percent from a year ago. The split for marketing services revenue is $1.02 billion for owned and operated sites with the remainder accounting for affiliates.
• Revenue excluding TAC was up 8 percent from a year ago.
• Operating income was down 45 percent to $101 billion. Yahoo said it spent $22 million on advisors related to Microsoft’s proposal to buy all or part of the company as well as the Icahn proxy fight.

• U.S. revenue was $1.26 billion, up 13 percent from a year ago. International revenue was down 8 percent to $534 million.

In a statement, Yahoo execs touted its open platform strategy as well as its deal with Google (GOOG). CBS’ CNET, parent of ZDNet, is also a Yahoo partner.

CFO Blake Jorgensen chalked the quarter up as a win:

“Despite a difficult economic environment, we posted solid results in line with the ranges we indicated in April. Our diverse advertiser base and compelling value proposition for our customers were key factors behind Yahoo!’s strong second quarter performance.”

Comments

[najdorf]

I can't imagine why anyone is an investor in Yahoo! at this point. This is a company that makes about .10 per share per quarter with minimal growth - right now the trailing earnings are pumped up by the Alibaba.com spinoff. The market value of their Asian assets has plummeted since 1Q, and both Alibaba.com and Yahoo! Japan are publicly traded if you want a piece of them.

Yahoo! executives get more out of the company than shareholders - no dividend, sitting on cash and failing to grow, spending big on lame acquisitions, rejection of a MSFT deal that would have represented a huge payday for shareholders - and at the same time the grants and options keep flowing. If I worked at Yahoo! and owned any shares that I wasn't required to hold, I would sell to Bill Miller or Carl Icahn at any price they would take. In the last 12 months insiders have sold almost 3,000,000 shares, led by Terry Semel. I bet the board feels really good for granting him all those options and shares to lead the company to its current low-earnings, low-growth state and then quit. Filo is also selling shares - I can only fault him for not selling more - he's way under-diversified for a billionaire.

For about 30 billion a person could buy all of Yahoo (assuming the idiots currently holding it would let it go at today's price, though of course we've seen evidence that they won't let it go at a huge premium to market value). For about the same price one could buy a profitable company that produces tangible goods such as Alcoa, Texas Instruments, or ADM. Why would you put up with Yahoo!?

[User 231093]

Mr. Icahn should work hard with all the companies he is dealing with and help does companies to improve them self. On the other hand he is just taking advantage of the company’s problems to benefit him self without taking into consideration the fact that there people with families working in those companies. Basically what he is doing is taking the money, jobs and benefits from the people of those companies.