Yahoo Investors disappointed on Shallow forecasts, Shares fall

Yahoo Inc. posted a drop in fourth quarter profit on Tuesday and announced that it would be laying off some 1,000 jobs in an attempt to cut costs and shift focus to the core business. The revenue forecast for 2008 was below the Wall Street’s expectations.

Executive of the Sunnyvale, Calif.-based company revealed that Yahoo plans to make huge investments in some areas and the dismissed employees can apply there.

In fiscal 2008, Yahoo is expecting net sales to be between $5.35 billion and $5.95 billion, below the analysts’ estimation of $5.89 billion.

Net income for the fourth quarter dropped to $205.7 million or 15 cents a share, from $268.7 million, or 19 cents a share, in the same period a year ago.

Revenue went up 8% to $1.8 billion. Net sales, excluding the amount Yahoo pays to other Web sites to acquire traffic to its site, rose to $1.4 billion from $1.2 billion.

Although Yahoo’s quarterly profit topped analysts’ projections, the company warned of the upcoming hard times. Investors were disappointed, and Yahoo shares dropped nearly 10 percent in after-hours trading.

“While we will continue to face headwinds this year, we believe that the moves we are making will help us exit 2008 stronger and more competitive and return to higher levels of operating-cash-flow growth in 2009,” Jerry Yang, Yahoo’s chief executive, said in a statement. "We're making profound, fundamental changes to virtually all aspects of our business."

Investors, of late have been largely concerned that the economic and financial market downturn could further hurt Yahoo’s prospects in 2008.

Yahoo insiders joined investors in complaining that in its attempt to build up a huge audience, the company had expanded too much and needed to narrow its focus.

Separately, Yahoo said, it has renegotiated a lucrative partnership with AT&T, but the companies did not provide financial details of the new agreement.

Yahoo shares fell to $18.56 in extended trading after closing at $20.81 on the NASDAQ. The stock is off 45 percent from a year-high level in October, of around $34.