Yahoo reported earnings today. It missed on revenues and earnings per share. CEO Carol Bartz blamed display ad sales – specifically, a re-organisation of the US salesforce.”We didn’t have enough sales people in front of the big clients,” she said during an earnings call.
- EPS: $0.19 vs $0.18 expected.
- Revenue: $1.076 billion vs. $1.11 billion expected
From the release:
- Display revenue (after TAC) was up 5%, $467 million, compared to $445 million for the second quarter of 2010.
- Search revenues (after TAC) sank 15%, $371 million versus $438 million for the second quarter of 2010.
- Q3 OUTLOOK: Revenues of $1.05 billion to $1.1 billion vs analyst expectation of $1.12 billion.
LIVE NOTES FROM THE CALL:
4:52 We’re listening to the call now. Just muzak so far.
5:01 The call is on! Bartz and CFO Tim Morse are on the call. We’ll be hearing about the Microsoft deal and Alipay, too.
5:02 Carol just took the phone. She says the quarter was a mix of good, encouraging and discouraging. Good: expenses were managed, profits were up, and Yahoo bought a lot of stock.
5:03 Carol address Alipay: “We’ve been working on this negotiation continuously, in fact daily.” Until every word is finalised and every document finalised “We’re simply not done.”
5:04 Here’s what’s unsatisfactory: Revenues. US display did not perform as expected. The Americas region was flat, with US display down, unexpectedly.
5:06 What happened: In the first half of Q2, performance came as expected. But as the quarter expected, there was increasing softness. It was not about the economy, new competition, or engagement. The root cause was changes to US leadership and US sales org structure. There was significant turnover among the salespeople on the street. “We underestimated how much the changes would leave to turnover.”
5:07 So why the big sales re-org? New leadership: Wayne Powers, Ross Levinsohn, and Mark Ellis. They got close to the customers and sales people. They found Yahoo was pitching reach and scale too much. They want to pitch customised solutions. The sales staff is almost back up to where it was. And it will end up bigger. It’s investing in video and mobile ad sales.
5:10 Bartz says Q3 guidance will come in below long term expectations because of this re-org.
5:11 Bartz says search was better than expected.
5:11 Tim Morse just took the phone. He’s going over display numbers. Europe and Asia did well. The Americas region did not. He says “the US sales force is under transition and we simply didn’t’ have appropriate coverage.” Ad supply wasn’t an issue. Sell-through was low and many premium ads were run through the exchange. The homepage had significantly fewer guaranteed placements than in the previous quarter. Lower ad revenue in CPG, autos, and retail accounted for 2/3 of the shortfall.
5:14 Now Tim is talking about search. He says YHOO benefited from the MSFT RPS guarantee. In the US, where the transition to MSFT search is complete, query volume and RPS were flat.
5:15, Morse says Yahoo is spending $30 million on data centres.
5:20 Now he’s talking Yahoo Japan. He says some plans have been “dead-ended” because they were “unique.”
5:20 Carol is back. She’s going to talk about Search. She says YHOO has closed 1/5 of the RPS gap that existed in April has been closed. “We believe we’ll achieve RPS parity by the end of the year.” Future plans: the transition to MSFT’s algorithmic search is complete in the US and the rest will finish this year. Paid search will complete in 2012.
5:24 We’re not getting much in the way of product updates b/c investors day was so recent. All that she mentions is an update to Yahoo’s content management system.
5:27 We’re on to the questions segment.
5:27 Analyst wants to know more about display.
5:27 Bartz says Yahoo is back to where it was 6 months ago, with its head down. She says there’s going to be a lot of training of Yahoo sales staff. She says they will have to learn how to sell custom solutions. She says they’ll be up to speed by Q4. She wants a sales force that’s more than “gee, well, we’re big.”
5:30 Bartz says that the economy has had some softness in retail and CPG, but that wasn’t Yahoo’s issue. The issue was: “We didn’t have enough sales people in front of the big clients.”
5:35 Morse said entertainment, travel and finance were up.
5:35 Morse says the China plans are separate from the Yahoo Japan plans.
5:35 Carol says she can’t comment on Hulu.
5:38 Carol says the new guys are going in and talking to advertisers about their brand stories, not just saying: “Yahoo is big, because guess what, our competitors are big, too.”
5:43 Carol says Yahoo has “almost totally rebuilt our media team” – working on the Yahoo voice. Minutes on Yahoo News is up big.
5:49 Bartz says mobile usage is up…no specifics.
5:53 She says Yahoo is reducing quotas, and adding sales reps.
6:00 – that’s it!