Last month, the company said that it probably would break even in the first quarter before acquisition-related costs and some other expenses. Including those expenses, Yahoo is likely to have a loss, investors said. Excluding the same items, Yahoo would have earned US$63.3 million, or US$0.10 a share, a year earlier.
Advertisers have reduced their spending as the US economy has slowed, cutting growth at media companies including Yahoo, Walt Disney Co and News Corp. The decline in the shares of Internet companies also has reduced Yahoo's sales. Many of its advertisers were dot-coms, some of which are now short of cash or out of business, analysts said.
"Whether or not there was further deterioration in the first quarter is less important than whether management can express confidence in the rest of the year," said Frederick Moran, an analyst at Jefferies & Co. He rates Yahoo shares a "hold."
Yahoo executives declined to give a forecast for the rest of the year when they cut their first-quarter forecast last month, citing a lack of "visibility" on the US economic outlook for the second half. Chief financial officer Susan Decker said then that the company is "committed to break-even profitability."
First-quarter revenue was expected to be US$170 million to US$180 million, the Santa Clara, California-based company said. It reported US$228.4 million in sales a year earlier.
Yahoo shares on Friday fell US$0.44 to US$14.81 on the Nasdaq Stock Market. The shares have fallen 90 percent over the past year.
Yahoo's transition
Yahoo has been trying to revive its earnings growth by selling more ads to consumer-products companies and others whose main businesses aren't on the Internet.
The company also made a series of announcements last week about new efforts to increase revenue from sources other than advertising.
Last Monday, Yahoo said it will start a new online subscription service that will deliver real-time stock quotes, financial news and investment research.
On Wednesday, the company said it formed a partnership with SAP AG, the biggest maker of business-management software, to set up and run other companies' internal Web sites.
And on Thursday, Yahoo said it will start a paid-subscription online music service in a partnership with Sony Corp and Vivendi Universal SA, two of the biggest music companies.
"The long-term trend is about how well they transition from an advertising-based service to a subscription based service," said Uri Landesman, chief investment officer of AFA Management Partners LP in Greenwich, Connecticut.
New CEO
Yahoo also is looking for a new chief executive to replace Tim Koogle, who resigned last month. Koogle said he'll stay with the company as chairman.
"They should hire a CEO from a subscription-based service," Landesman said. "That would be my advice." Landesman doesn't hold Yahoo shares, he said.
Analysts project Yahoo will earn US$0.06 a share this year, excluding acquisition-related costs, taxes on employee stock option gains, stock-based compensation, amortization of goodwill and purchased technology, and some investment gains and losses, according to the average estimate of analysts polled by First Call/Thomson Financial. On the same basis, it would have earned US$291 million, or US$0.48 a share, last year.
Revenue this year will decline about 29 percent to US$791.4 million, according to First Call estimates.
The company is scheduled to release its earnings on Wednesday at 1.30pm. California time.
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