By David Gaffen
The Wall Street Journal
Investors have had a euphoric reaction to Yahoo's earnings in trading Wednesday - after the company surpassed analyst expectations with its report, despite the poor outlook for display advertising in the weak economic environment.
But the company's losses and coming challenges put the analyst community in a Missouri mood. Multiple Wall Street researchers, in commentary said they were taking a wait-and-see approach as the company's new CEO, Carol Bartz, sets the company's direction and after the company declined to provide annual guidance for the first time.
For the quarter ended Dec. 31, Yahoo reported a loss of $303.4 million, or 22 cents a share, compared with year-ago net income of $205.7 million, or 15 cents a share. However, excluding certain items, the company earned 17 cents a share, which surpassed the 13-cent consensus, according to Thomson Reuters.
Without guidance, analysts are left to their own devices to estimate how 2009 will turn out, and current expectations are for revenue of about $5.4 billion, a figure that analysts at Signal Hill say should decline. "We think fundamentals will be under pressure for the foreseeable future due to its heavy exposure to the display advertising market," they wrote.
Ms. Bartz, in her first conference call as CEO, said she did not take over to sell the company, though a deal to sell its search business to Microsoft is still considered a strong possibility. Some believe the company is unfortunately operating from a weak position, though.
ThinkEquity analysts wrote that "we see a search-only deal as unlikely, given the potential risks to Yahoo!'s display sales leadership and its display platform roadmap over the longer term." They advocate a sale of the entire business to Microsoft, or the reverse - a sale of Microsoft's search traffic "or the entirety of MSN" to Yahoo.
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