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- EPS $.25 vs $.24
- Revenues: $1.17 billion vs. $1.19 billion.
This is one of those quarters where the numbers don’t matter all that much.
Yahoo was without a permanent CEO the whole quarter, having fired Carol Bartz in the Fall.
The board spent most of the quarter trying to figure out whether it should sell a big stake in Yahoo to private equity or sell its own stakes in Alibaba and Yahoo Japan. Or do both.
Yahoo finally hired a CEO earlier this month – Scott Thompson, a former president at PayPal. Then Yahoo cofounder Jerry Yang stepped down from the board.
Next Yahoo will sell some or all of its stake in Yahoo Japan. After that and the Alibaba deal gets done, much of Yahoo’s board will step down. There will also be small “across the board” layoffs soon, a source tells us.
We’re going to listen to today’s earnings call and take notes here. We’re going to listen for…
- Scott’s early impressions of the business. He has no experience in media, where Yahoo makes most of its money. Does he know what he’s talking about yet?
- Details about any Yahoo layoffs.
- Scott’s general turnaround plan.
- When and if Yahoo sells its stake in Alibaba, it will get some operating businesses in return (to avoid taxes). We don’t expect him to announce anything about what kinds of businesses Scott would like Yahoo to acquire, but maybe we can scrounge up some hints.
LIVE NOTES FROM THE CALL:
(Note: Anything note in quotes is just a paraphrase)
4:15 – We haven’t even dialed the number yet! The call isn’t till 5. Stay tuned…
5:00 – We’re back! And we’re holding the line. We’re listening to some piano music.
5:01 – We’ve got CFO Tim Morse and CEO Scott Thompson on the line.
5:03 – Scott takes the line. It’s been 3 weeks since he took the job.
5:03 – He says he researched Yahoo a lot before he came, and had strong opinions. He said Yahoo has strong assets and talented people. A powerful brand. Lots of visitors. Relationships with leading advertisers. We will focus on real sustainable growth and value creation. We have a lot of work to do. I dont’ intend to lay out any detail strategy.
5:04 – Any time you want to move a company as big as Yahoo, you need a guiding principle. The guiding principle for me is to insist we be balanced. That balance aplies to many things. How we thinkg about customers , who we are, and our capital. We’ll prioritise the most important thing.
5:06 – There’s no question that we need to do better and we will. The company has been growing users and launching products at a faster rate but we need better execution to launch to market faster and better monetise.
5:07 – Now Tim Morse, CFO, has the phone. He’s going over the numbers.
5:09 – Flattish performance in US display advertising muted growth in the rest of the world.
5:11 – Yahoo invested $250mm in new products and services.
5:12 – Free cash flow went up thanks to a reduction in capital spending. Yahoo re-purchased $1.6bn worth of stock.
5:14 – Search results are ahead of expectations. Grew 4%. First search growth achieved since Q4 2008.
5:16 – Yahoo grew its audience 11% y/y. Yahoo will continue its media strategy of building out lots of content around big news events.
5:18 – We’ve lost share in display advertising. We expected better.
5:18 – Ex-TAC revenue expectation for Q1: $1.025 bn. Guidance that is flat like that is not reflective of the company’s long term hopes.
5:19 – Key takeaway from Morse: We are going to widen these margins beyond the low teens.
5:20 – We’re in active discussions with our Asian partners to significantly restructure those stakes to unlock value. We can’t provide further detail or certainty.
5:20 – Scott is back on the line. Our results need to improve.
5:21 – Scott says he wants a balanced approach to operating the business. Four areas. Customers: our focus will be on the needs and experiences of our customers. Both users and advertisers. This will drive revenue and the financial outcomes we want. Our users need to see the value of stopping by Yahoo for content and services. Advertisers need to know our success is defined by their success.
5:22 – Yahoo needs to balance who we are. Yahoo is a media company and a technology company. We need to be great at both.” We end the debate about which is more important. We must do both.”
5:23 – Must balance thoughtfulness with speed. I want to go fast. I immerse myself in details, but I make decisions fast. We will bring speed back into the equation. That’s how we get into playing offence instead of defence.
5:24 – We will balance our capital allocation on products of today, tomorrow and long term. I believe a majority of our resources should be put toward our current products. A very signicant portion should go toward tomorrow. We’ll also need invest a small, but meaningful amount on products that will come more than 12 months out. optimising the core and investing in the future. “Vibrant and long term product pipeline.” We’ll consider revenue streams that look different than the core today.
5:25 – This isn’t about starting from scratch on a new investment cycle. We will repurpose existing investment cycles. There will be somethings we stop doing. Our process will be straightforward, prioritise. We will not just protect current revenues. We will consider new business models and revenue sources. We will build on our core.
5:26 – I have some spefici ideas. Can’t share. But generally, going to focus on customers and data.
5:27 – On customers. We have 700 million of them. The shear number of users will not get us where we need to be. We need to improve the quality of their experiences. We want them to spend more time because they love what we do for them. Faster, deeper. Making the experiences so good that the users we really want come back to Yahoo for what they want whenever they want it on the devices they choose. For advertiser: we want to give them better tools.
5:28 – Data. We can use data to render the experience exactly the way you want it. Uniquely relevant experiences. Layout. The flow between pages. Advertising. Nobody’s done yet on the web. Yahoo has made some real progress in data. There’s a long way to go to get to that uniquely relevant experience. Lots of company talk about data. Data is Yahoo’s biggest under valued asset. “I believe data will be the key component for driving innovation at Yahoo. It will be the cornerstone for creating new products and services.”
5:30 – Now Scott is talking about the strategic review process. We’re focusing on what’s most promising. I have clear opinions on this stuff. I won’t say more. I am confident that the steps we take will be in the best interest of shareholders.
5:31 – I am here because I believe there is big potential at Yahoo. Much bigger than the outside world believes. I have a proven track record in the consumer tech space, facing deep-pocketed rivals. I am here because I believe this company can do much more to innovate, build great products, and leverage technology. Getting back to these core principles will grow this business. Maybe the most important thing to know about me is I define success by the succes of our customers. Users. Advertisers.
5:33 – Time for questions from analysts.
5:33 – Analyst wants to know how Interclick will impact Q1. Morse says it will add $25mm in cost and $10mm in revenue. So about a $15mm loss. That will ramp healthily throughout the year, he says. (In the good way presumably.)
5:34 – RPS gains in the fourth quarter are a “nice job by Microsoft” and Yahoo’s sales force.
5:35 – Is M&A going to be a big part of Scott’s strategy?
5:36 – Scott says: I suspect that there will be places where we don’t ahve the technologies today or the capablities today. If we want to put forward these agendas quickly, we’ll have to be aggressive in the market. I’m relatively certain here that there will be things that interest us and fill in technology gaps we have today.
5:38 – Scott says he’s spending a lot of time trying to figure out what’s going on in the advertising business. That is the very highest priority I have, he says.
5:44 – Scott says he hasn’t picked a strategy to invest in yet. It’s too early.
5:51 – An analyst just asked Thompson if Yahoo is a tech or a media company. Again, he says its both.
5:55 – Tim Morse says the Interclick acquisition will help Yahoo better monetise its class two inventory.
6:00 – That’s a wrap!