Yahoo declines after sales forecast misses estimates

Yahoo! Inc fell in German trading after the company’s first-quarter sales outlook missed analysts’ estimates, dragged down by early results from its search agreement with Microsoft Corp.

The company forecast revenue, excluding sales passed on to partners, of $1.02 billion to $1.08 billion, compared with $1.14 billion, the average of estimates in a Bloomberg survey. Operating profit will be $130 million to $160 million this quarter, short of the $201.8 million projected by analysts.

Chief Executive Officer Carol Bartz, who has slashed costs to help drive a two-year-old turnaround effort, said on a call with analysts that the alliance with Microsoft is not yet producing as much ad-based revenue as expected. Yahoo and Microsoft merged their search-ad operations in the US and Canada in the fourth quarter, igniting hope that they could mount a bigger challenge to market leader Google Inc.

“There is a transition issue that needs to be worked through,” said Lou Kerner, an analyst with Wedbush Securities Inc in New York. He rates the stock “underperform” and doesn’t own it. “They seem confident they’ll be able to work it through, but they certainly were caught off-guard by the difficulty of the transition.”

Yahoo didn’t get as much revenue per search as it had expected, company executives said yesterday.

That figure will be “flattish” this quarter, and may show signs of improvement by midyear, Chief Financial Officer Tim Morse said during a call with analysts.

“There’s no bigger focus for the alliance,” Morse said.

Yahoo, based in Sunnyvale, California, fell as much as 2.4 per cent to the equivalent of $15.63 in German trading today from yesterday’s Nasdaq Stock Market close of $16.02. The stock stood at the equivalent of $15.83 as of 11:47 am. in Frankfurt.

Bartz cuts back
Bartz is aiming to make the company more efficient as it grapples with competition from Facebook Inc. and Google. Yahoo said yesterday it was eliminating about 1 per cent of its workforce.