UPDATE: Yahoo CEO Sees 'Less Fear' In Marketplace
July 21 2009 - 7:19PM
Dow Jones News
Saying it was too early to call a bottom to the economy, Yahoo
Inc. (YHOO) Chief Executive Carol Bartz said Tuesday the Internet
search giant was ramping up investments so it could seize the
growth opportunities that will come when the recovery begins.
"Overall we're seeing less fear in the marketplace, and
advertisers are planning their spending more actively than they did
earlier this year," Bartz said during a conference call with
analysts after the company reported lackluster second-quarter
results and a disappointing third-quarter forecast.
The company squeezed out a slightly better than expected profit
in the second quarter as it slashed expenses enough to offset a
sharp decline ad revenue.
But Bartz and recently appointed Chief Financial Officer Tim
Morse said the struggling Internet giant would increase spending by
$75 million in the third quarter to redevelop its technology
platform, bolster its marketing campaign and develop its ad
platforms.
The Sunnyvale, Calif.-based company indicated the investments
would come at the expense of short-term margin growth.
"Over the long term I think we both guarantee we're going to
drive margin expansion, just in the interim here, you know, there
are things we've got to get done and there's a lot we don't control
in the economic climate," Morse told analysts.
"We've drained all the right buckets and now we're filling back
up different buckets," said Morse, the former CFO at semiconductor
company Altera Corp. (ALTR) who joined the Internet giant on July
1.
Bartz praised Microsoft Corp. (MSFT) for its new Bing search
engine, which was launched at the beginning of June.
"It's only a month into it so it's pretty hard to understand
whether it's just curiosity driving what's happening or they're
actually going to gain share, but I think Microsoft should be given
kudos for Bing," she said. Technology blog All Things Digital said
last week that talks between Yahoo and Microsoft to secure a search
and online advertising pact had heated up once again and could
result in an agreement within the next week.
Yahoo declined to comment on the report, but Bartz has publicly
said she would agree to a partnership with Microsoft for the right
price and assurances her company would have adequate access to
users' search data, which is critical so that Yahoo can better
target ads to people who are most likely to be receptive to
them.
Analysts believe any deal would see Yahoo receive a large lump
sum and be guaranteed billions more dollars spread over several
years. Yahoo also could reap annual savings estimated at $500 from
not having to run its own search engine.
Yahoo also announced Tuesday it had redesigned its home page so
users could easily add custom Internet, such as social-networking
services like Facebook and Twitter. Bartz told analysts the
redesign would create new opportunities for users and advertisers
to try new things, all of which would lead to revenue growth "over
time."
Yahoo has struggled to find its footing amid intense competition
from Google Inc. (GOOG), which dominates the search market and is
more effective at making money from search ads. Yahoo is also
contending with a slowdown in display advertising spending, a key
market to which Yahoo is more heavily exposed than Google or
Microsoft.
Yahoo's U.S. search engine market share has stabilized at about
20%, a distant second to Google's 65%, but higher than Microsoft's
8% share, according to research group comScore Inc.
Shares in Yahoo were trading at $16.30 after closing the regular
session at $16.75.
-By Scott Morrison, Dow Jones Newswires; 415-765-6118;
scott.morrison@dowjones.com