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Yahoo's 4Q progress brightens 2010 outlook

business Updated: Jan 27, 2010 14:19 IST

After a painful descent, things may finally be looking up for long-suffering Yahoo Inc.

Coming off its best quarterly performance since hiring Carol Bartz as its chief executive a year ago, Yahoo promised late on Tuesday to deliver even more meaningful progress this year. For starters, the Internet company expects its revenue for the three months ending in March to rise 3 per cent to $1.63 billion. Modest as that sounds, it's a breakthrough for Yahoo after five consecutive quarters of declining revenue while Google Inc. vacuumed up even more Internet advertising.

Even if the company hits management's target, Yahoo's first-quarter revenue will still be nearly $200 million below where it stood two years ago.

Bartz has been vowing since her arrival to engineer a turnaround that eluded her two predecessors, but her efforts through most of 2009 were hampered by the recession.

Yahoo's fourth-quarter results released on Tuesday provided the latest evidence the Internet ad market is regaining its legs as the economy stabilizes. Google, the Internet's dominant advertising vehicle, closed out 2009 with its most robust growth of the year. "Things seem to be returning to a more normal state in the online advertising business," Bartz told analysts in a Tuesday conference call.

Yahoo earned $153 million, or 11 cents per share, during the final three months of 2009, rebounding from a loss of $303 million, or 22 cents per share, in the prior year.

If not for charges for internal reshuffling and a proposed search partnership with Microsoft Corp, Yahoo said it would have made 15 cents per share in the quarter. That topped the average estimate of 11 cents per share among analysts surveyed by Thomson Reuters. Yahoo shares climbed 60 cents, or 3.8 per cent, in Tuesday's extended trading. Before the results came out, the stock finished the regular session at $15.99, up 13 cents.

Revenue slipped 4 per cent to $1.73 billion. In contrast, Google's fourth-quarter revenue surged 17 per cent. Yahoo still did better than the first nine months of 2009, when the company's revenue dropped 12 per cent.

In a sign of Yahoo's growing confidence, the company added 700 workers to its payroll in the fourth quarter to end December with 13,900 employees. That's still down from Yahoo's recent peak employment of 15,200 in September 2008.

Yahoo also intends to buy other companies this year, Bartz said, setting her sights mostly on small deals.

For all of 2009, Yahoo earned $598 million, or 42 cents per share, on revenue of $6.46 billion. That compared with income of $419 million, or 29 cents per share, on revenue of $7.21 billion in 2008.

Yahoo had been struggling even before the recession's onset in December 2007, as Google widened its lead in the Internet's lucrative search market, while online hangouts such as Facebook emerged as new hot spots for advertising.

Bartz has been trying to spur more advertising with a makeover that has included a redesigned front page that makes it easier to connect to Facebook and other sites. The front page sold all its available advertising in the fourth quarter, Bartz said.