Yahoo hits profit forecasts despite revenue slide

Yahoo’s revenues slipped again in the final months of last year, declining by 3 per cent to $1.17bn, as the US internet media company lost further ground in display advertising in the face of inroads made by Google and Facebook.

News of the latest dent to the company’s display business follows a shake-up in Yahoo’s leadership this month with the resignation of co-founder Jerry Yang and appointment of Scott Thompson, a former PayPal boss, as chief executive.

Speaking to Wall Street analysts on Tuesday for the first time since taking over, Mr Thompson promised rapid changes to repair Yahoo’s core businesses and bring growth back to the company. He also hinted at radical departures that would take the company into new businesses with new sources of revenue.

However, Mr Thompson also dodged analysts’ questions about changes he planned to make, other than saying that Yahoo would seek to use data collected from its users’ behaviour on its existing services to create a new generation of more personalised online products.

“We need better execution to accelerate time to market and to better monetise the attention we have,” Mr Thompson said.

The company’s shares slid nearly 1 per cent in late trading as Wall Street digested the latest erosion to its advertising business and waited for more news on the company’s plans to revive growth and boost its share price by shedding its Asian investments.

Net revenues in display advertising fell by 4 per cent as Yahoo continued to struggle to respond to the explosion of new, lower-priced inventory unleashed on the web by the growth of rivals such as Facebook and Google. Meanwhile, revenues from search dropped by 3 per cent as the company continued to see declines following its search alliance with Microsoft.

The latest earnings reflected a continuation of the declining revenues and tight cost controls seen under former chief executive Carol Bartz. Thanks to lower costs and a reduction in restructuring expenses compared to the year before, Yahoo was able to register a 10 per cent advance in operating income in the latest quarter, to $242m, despite the revenue decline. At 24 cents a share, in line with the year before, earnings for the final quarter of 2011 hit Wall Street expectations, despite the slight shortfall in revenues and a rise in its tax rate.

Revenues net of traffic acquisition costs of $155m came to $1.17bn, down from $1.2bn a year before.

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