Yang: Yahoo is progressing, despite lower profits

By Jacqueline Emigh | Published July 23, 2008, 1:10 PM

Although Yahoo on Tuesday announced second quarter financial results showing a 19 percent drop in profits, company CEO Jerry Yang contended that his company is making progress on three goals -- around Internet content, advertising, and application development -- stipulated earlier as ways of boosting Yahoo's fortunes.

"You'll recall that we identified three strategic objectives to accelerate our growth and create long-term value for Yahoo shareholders: to become the starting point for the most consumers on the Internet; to establish Yahoo as the "must buy" for the most advertisers; and to deliver industry-leading platforms that attract the most developers," said Yang, during a conference call with financial analysts.

As previously reported in BetaNews, Yang originally outlined these strategies to shareholders earlier as part of an approach to keeping the company independent and averting potential buyers such as Microsoft.

Yang's comments on Tuesday, however, came only one day after Yahoo made concessions to one of its key shareholders, Carl Icahn, a move some analysts now see as a possible springboard for bringing Yahoo back to the negotiating table with Microsoft.

While Yahoo's net income per share declined to 9 cents for April through June of 2008 from 11 cents during the same quarter of 2007, the company's revenues amounted to $1.798 billion this past quarter, a 6 percent increase over the second quarter of last year.

During the conference call, Yang and other Yahoo officials gave a number of examples of how Yahoo is meeting its trio of objectives. In the interests of becoming an "Internet starting point," for example, Yahoo is "placing an increasing emphasis on bringing all of the Web's capabilities together in a way that is personally relevant and simple," said Susan Decker, Yahoo's president. "For Yahoo, the five properties that are most critical in this regard are our Home Page, Search, Mail, My, and Mobile. There are also a few anchor property verticals like Sports, Finance, and News that drive traffic to those starting points and therefore play a central role in our strategy," according to Decker. Meanwhile, Yahoo has also "discontinued or demphasized almost a dozen properties including Photos, 360, Brand Universe, Premium Music, Podcasts, Directory, Voice, and others," she told the analysts.

With regard to building up Yahoo's advertising business, the company made a strategic decision last year to create "the leading advertising network platform, supplemented by strategic acquisitions like Right Media and BlueLithium," Yang noted. Yang also announced during the call that Yahoo has expanded its relationship with AT&T to become "their ad platform partner in search and display [advertising] for their portal and mobile platforms."

Meanwhile, in an effort to attract more developers to its platform, Yahoo earlier this month launched BOSS (Build Your Own Search Service).

But despite some progress, the company still has a long road ahead to turn around its fortunes. On Monday, Yahoo gave activist investor Carl Icahn -- a proponent of a merger with Microsoft -- three seats on Yahoo's board, in an effort to ward off a battle with Icahn for control of the entire company. Icahn had earlier proposed oustings of both Yang and Yahoo's whole board of directors.

In a note to clients this week, George I. Askew, an analyst at Stifel Nicolaus, said that the settlement signals that "Icahn is confident that Yahoo's board is serious about incremental corporate actions to create shareholder value."

Like some other analysts, Askew believes that Yahoo's concessions could bring a renewal in the deal talking between Yahoo and Microsoft -- either to discuss an acquisition of the entire company, or this time around, a buyout of Yahoo's search engine unit alone, without Yahoo's advertising business.