After a while–in a BoomTown mangling of the old cliché–if you are a nail, everything begins to look like a hammer.

So, it is probably inevitable that the next thing for much-beleaguered AOL staffers to start rumbling about is 2,000 people getting laid off next week, as was reported earlier this week by Silicon Alley Insider.

After all, the Time Warner (TWX) unit has a long history of whacking employees. So, it is easier to assume things will not be different under the regime of the latest CEO Tim Armstrong.

Except it’s not actually true that such massive cuts are in the offing, since–as many sources I spoke to said–Armstrong is only in the early part of figuring out what to do about the cost structure of AOL, after laying out a company strategy and rejiggering management recently.

While the end result of the cost-to-benefit analysis might, in all likelihood, mean layoffs of a chunk of its 7,000 employees–a larger number for its smaller operations.

And, after all, staff costs are one of the biggest line items in AOL’s budget–sources at the company said Armstrong will not rely on simply cutting jobs to craft a more attractive budget for its upcoming spinoff.

Still, there is obviously a lot of pressure on Armstrong to get the financials–which are still largely dependent on AOL’s declining, but money-generating, access business–looking pretty.

That access business did almost $2 billion in revenue last year–about half its sales–and it represented almost all its profits.

In contrast, AOL’s advertising business lagged, dropping hugely over the last several quarters.

Still, Armstrong has laid out a strategy that has included, in part:

Being a new kind of content giant, via a series of branded niche media sites, with about 500 full-time writers and editors and 1,500 freelancers; selling premium display advertising on these sites and strengthening its third-party self-service ad network business; finding a way to use its communications properties to redistribute traffic to other properties in a kind of virtuous circle.

There are also local, analytical and venture elements. But–for all intents and purposes–Armstrong’s plan is a content-and-advertising model, supported for now by the dwindling piles of cash from the access business.

That’s why, of course, costs are the next item on Armstrong’s to-do list.

“The cost structure is the last part of what was going to be dealt with, as Tim has told everyone,” said one person close to the situation about the former Google (GOOG) exec. “But, if it is slash-and-burn only, that would be pretty short-sighted.”

Perhaps, except that it is that exact tactic that has been business-as-usual at AOL for far too long.

As BoomTown promised earlier today, here’s the first of many filings related to the Yahoo-Microsoft online search and advertising deal announced last week.

The 8-K filing was made with the Securities and Exchange Commission by Yahoo.

Some highlights, although most of them are not that new:

* No termination fee.

* There is a $50 million annual payment to Yahoo (YHOO) by Microsoft (MSFT) for three years, for unspecified “transition and implementation costs” beyond the agreement.

(Personally, I think it’s for extra Advil needed for the headaches engendered organizing this circus.)

* At least 400 Yahoo employees will be hired by Microsoft, which will also provide funds for retention packages to keep 150 more Yahoos motivated during the transition.

* The “Definitive Agreement” between the Silicon Valley company and the Redmond, Wash., software giant needs to be sketched out by October 27, 2009.

But why don’t you read all the niggling details yourself, including about Google (GOOG), below (I stripped away only minor SEC legalese and fill-in-the-blank details):

Item 1.01. Entry into a Material Definitive Agreement.

Binding Letter Agreement–General Terms

On July 29, 2009, Yahoo! Inc., a Delaware corporation (”Yahoo!”), and Microsoft Corporation, a Washington corporation (”Microsoft”), entered into a binding letter agreement (the “Letter Agreement”), pursuant to which the parties will negotiate and execute a Search and Advertising Services and Sales Agreement and a License Agreement (the “Definitive Agreements”), each reflecting and supplementing the provisions of such Definitive Agreements as set forth in annexes to the Letter Agreement, the material provisions of which are summarized below.

Negotiation and Execution of the Definitive Agreements

Pursuant to the terms of the Letter Agreement, the parties will negotiate and execute the Definitive Agreements as soon as practicable but in any event by October 27, 2009 (the “Negotiation Period”). If the Definitive Agreements are not executed during the Negotiation Period, the parties will submit any disputes regarding the final terms of the Definitive Agreements to an arbitration panel. The arbitration panel will render its decision based upon the terms of the Letter Agreement, the nature of the commercial relationship to be created thereunder, and the submissions and presentations of the parties at a hearing conducted by the arbitration panel. The arbitration panel will render a decision by choosing the final proposed contractual language of either Microsoft or Yahoo! without modification, subject to a final review process to resolve any potential inconsistencies. The decision of the arbitration panel will be binding on the parties, and the parties agree to execute Definitive Agreements as determined by the arbitration panel within three (3) days of the receipt of the arbitration panel’s final decision.

Regulatory Review

Microsoft and Yahoo! agree to use their respective best efforts to cooperate in connection with all necessary regulatory filings. In addition, as soon as practicable after July 29, 2009, Microsoft and Yahoo! will make all filings required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended (the “HSR Act”) and by any applicable foreign antitrust laws. Microsoft further agrees to use its best efforts to obtain any consents, clearances or approvals required under or in connection with the HSR Act or any other applicable antitrust law, including offering, negotiating or committing to any restrictions on the activities of Microsoft and its subsidiaries in search and paid search and contesting and defending any threatened or pending litigation, investigation or proceeding under applicable antitrust laws.

Conditions to Commencement and Termination Prior to Commencement

The obligations of each party to commence performance of their obligations under the Definitive Agreements (the “Commencement Date”) are only subject to (a) termination or expiration of the HSR Act waiting period and receipt of certain required foreign antitrust approvals and (b) the accuracy of the party’s representations and warranties in the Letter Agreement as of the time immediately prior to the Commencement Date and performance by the other party of its obligations required to be performed by it in connection with the Letter Agreement and the Definitive Agreements at or prior to the Commencement Date, except where the failure of such representations and warranties to be true and accurate or the failure of such performance would not, individually or in the aggregate, have a material adverse effect with respect to such party.

Prior to the Commencement Date, the Letter Agreement and Definitive Agreements may be terminated only by (a) mutual consent, (b) if a breach renders a condition incapable of being satisfied by the Termination Date (as defined below), or (c) if the conditions to commencement have not been satisfied by July 29, 2010 (the “Termination Date”); provided that Yahoo!, in its sole discretion, has the right to extend the Termination Date by six (6) months if the required antitrust approvals have not yet been obtained.

Search and Advertising Services and Sales Agreement

Pursuant to the Letter Agreement, the parties have agreed to enter into a global Search and Advertising Services and Sales Agreement (“Search Agreement”), which will include, among other provisions, the terms summarized below.

General Services

For a period of ten (10) years beginning on the Commencement Date (the “Term”), Microsoft will be Yahoo!’s exclusive technology provider for algorithmic and paid search services and Microsoft will provide contextual advertising to Yahoo! on a non-exclusive basis. Yahoo! will be the exclusive worldwide relationship sales force for Yahoo!’s and Microsoft’s premium search advertisers.

The services provided by Microsoft under the Search Agreement will be provided on all web sites, applications and other online digital properties owned or operated by or on behalf of (a) Yahoo!, Yahoo! subsidiaries and Yahoo! joint venture relationships, as well as on software applications developed or distributed by Yahoo! or Yahoo! subsidiaries that provide access to or enable algorithmic search services or paid search services (”Yahoo! Properties”) and (b) Yahoo! Syndication Partners (as defined below), as well as software applications developed or distributed by Yahoo!’s Syndication Partners that provide access to or enable algorithmic search services or paid search services from Yahoo! (”Syndication Properties”). “Syndication Partner” means a third party with whom Yahoo! has contracted to provide algorithmic search services or paid search services.

Subject to certain specified restrictions, Yahoo! will have full flexibility with respect to the user experience, content and look and feel on all of its web pages, and will also be entitled to use the paid search services and algorithmic search services for non-internet search queries with minimal restriction.

The scope of the services to be provided by Microsoft under the Search Agreement are limited to web sites, applications and other online digital properties designed for use and consumption on personal computers. In addition, Yahoo! may at its option elect to receive Microsoft’s mapping services and mobile search services. Yahoo! may implement each of the mapping services and the mobile search services on a non-exclusive or an exclusive basis. Yahoo! also has the option to work with Microsoft to implement the services on other platforms. If Yahoo! elects to receive services for other platforms, it must receive such services on an exclusive basis.

Revenue Share Payments and Other Payments

During the first five years of the Term, Yahoo! will be entitled to receive 88% of the net revenues generated from Microsoft’s services on Yahoo! Properties (the “Revenue Share Rate”). Yahoo! will also be entitled to receive its share (at the Revenue Share Rate) of the net revenues generated on Syndication Properties after the Syndication Partner’s share of net revenues is deducted. For new Syndication Properties during the Term, and for all Syndication Properties after the first five years of the Term, Yahoo! will receive its share (at the Revenue Share Rate) of the net revenues generated from Microsoft’s services on Syndication Properties after the Syndication Partner’s share of net revenues and certain Microsoft costs are deducted.

On the fifth anniversary of the Commencement Date, Microsoft will have the option to terminate Yahoo!’s sales exclusivity for premium search advertisers. If Microsoft exercises its option, the Revenue Share Rate will increase to 93% for the remainder of the Term, unless Yahoo! exercises its option to retain its sales exclusivity, in which case the Revenue Share Rate would be reduced to 83% for the remainder of the Term. If Microsoft does not exercise such option, the Revenue Share Rate will be 90% for the remainder of the Term.

Microsoft will also pay Yahoo! a payment of $50 million annually during the first three (3) years of the Search Agreement. Yahoo! may use these payments to partially cover transition and implementation costs not otherwise covered under the Search Agreement.

Microsoft will provide in each country an 18-month guarantee for the gross revenue per search (the “RPS”) for Yahoo! Properties. The guarantee will be based on the RPS average for the trailing 12-month period prior to the initial implementation of paid search services in such country.

Termination Provisions

In addition to the termination rights described in the Letter Agreement above, the Search Agreement may only be terminated as follows (each, a “Termination Event”): (a) either party may terminate upon repeated material breaches of material provisions of the Search Agreement such that it is unlikely that the breaching party is willing or able to continue to perform its obligations under the Search Agreement without continuing to materially breach it; (b) Yahoo! may terminate if Microsoft attempts to exit the business of algorithmic search or search monetization, either by ceasing to offer the services or by selling or attempting to sell all or substantially all of either its algorithmic search services business or paid search services business to an unaffiliated third party; (c) Yahoo! may terminate the Search Agreement if the trailing 12-month average of the RPS in the United States (the “U.S. RPS”) of Yahoo! and Microsoft’s combined queries falls below a specified percentage of Google Inc.’s (”Google”) estimated RPS measured on a comparable basis or if the combined Yahoo! and Microsoft query market share in the United States falls below a specified percentage; (d) on the fifth anniversary of the Search Agreement, and any time thereafter, Yahoo! has the right to terminate the Search Agreement if the trailing 12-month average of Yahoo!’s U.S. RPS is less than a specified percentage of Google’s estimated RPS; or (e) subject to exceptions, either party may terminate if a law, regulation or order would have a significant, adverse impact on a primary aspect of such party’s intended benefit of the Search Agreement.

If a Termination Event occurs in the United States, the entire Search Agreement may be terminated. If a Termination Event does not occur in the United States a party’s termination right is limited to the specific country or countries in which the event occurs.

If Microsoft proposes or attempts to sell all or substantially all of either its algorithmic search services business or paid search services business to an unaffiliated third party, Yahoo! will have a right of first refusal and right of last offer to purchase such businesses.

Service Level Agreements

The Search Agreement will provide (a) for service parity under which applicable application programming interfaces (”Microsoft API”) will be made available to Yahoo! at full parity with that which is made available to Microsoft’s internal teams; (b) for ranking and content parity under which Microsoft will provide the same algorithmic and paid search results in the same order as would be provided in response to the same inputs on web sites that are owned or operated by or for Microsoft, its subsidiaries and its joint venture relationships (”Microsoft O&O Properties”) in a particular country, including any content that is included in Microsoft’s algorithmic index; (c) for prioritization parity, under which Yahoo! will have full visibility into Microsoft product roadmap and parity with Microsoft’s internal teams in the product update prioritization process; and (d) for advertising parity under which neither party will allow advertisers to designate paid listings from Microsoft’s paid search or encourage advertisers to designate paid listings from Microsoft’s contextual advertising services to be displayed exclusively on Microsoft’s or Yahoo!’s respective results web pages. Furthermore, Microsoft will not treat Yahoo! or Yahoo!’s Syndication Partners less favorably than Microsoft and Microsoft’s partners in connection with its delivery and operation of the services.

Microsoft will optimize the delivery of paid listings by evaluating performance across all Microsoft O&O Properties and the Yahoo! Properties. The paid listings provided by Microsoft for Yahoo! will be optimized at parity with Microsoft’s optimization for Microsoft O&O Properties. Yahoo! may further optimize based on its own desired implementation.

Yahoo! may, at its option, elect to have Microsoft deliver the algorithmic search services and paid search services through a search results page hosted by Microsoft (the “White Label Solution”) on a country by country basis (if the United States is also a White Label Solution country), instead of through the Microsoft API. The White Label Solution will be in all material respects the same as Microsoft’s search results pages. Yahoo! may substitute Yahoo! applications or services for Microsoft applications or services within the White Label Solution.

Data Provisions

Microsoft will provide Yahoo! all data it collects as a result of its implementation of the services on Yahoo! Properties and Syndication Properties and, subject to Yahoo!’s privacy policies and applicable law, Yahoo! may use such data without contractual restriction in connection with its businesses. Microsoft will also use commercially reasonable efforts to enable Yahoo! and its Syndication Partners to obtain any other data that Yahoo! currently collects with respect to its own algorithmic search services and paid search services. Microsoft may obtain and use the data it collects as a result of its implementation of the services (including any derivative information that results from this data) only for the purpose of operating and enhancing the services and not for other Microsoft products and services.

Transition and Implementation Plan

As promptly as practicable, Yahoo! and Microsoft will agree on a detailed transition and implementation plan and schedule for implementing Microsoft’s algorithmic search services and paid search services on all Yahoo! Properties and Syndication Properties. The transition and implementation plan will be for a period of no longer than 24 months from the Commencement Date, subject to an extension for up to three additional months if the end of the 24-month period ends during the fourth quarter of a calendar year. The parties intend that the transition and implementation plan will be either set forth in a separate transition services agreement or as part of the Search Agreement.

Following the Commencement Date, Microsoft will hire not less than 400 Yahoo! employees (the “Transferred Employees”) and will offer the Transferred Employees market competitive compensation packages. In addition, Yahoo! and Microsoft will mutually agree on a retention plan to be paid for by Microsoft to assist in retaining the Transferred Employees and an additional 150 Yahoo! employees to be mutually agreed upon between Microsoft and Yahoo! to assist with providing the transition services.

License Agreement

Pursuant to the Letter Agreement, the parties have agreed to enter into a License Agreement (the “License Agreement”), which will include, among other provisions, the terms summarized below.

Exclusive Technology License

During the Term (as defined in the summary of the Search Agreement above), Yahoo! will grant to Microsoft a worldwide license (the “Technology License”) under copyrights and trade secrets relating to specified Yahoo! algorithmic and paid search technology for Microsoft to use in connection with providing specified algorithmic search, paid search and contextual advertising services (the “Field of Use”). The Technology License will be exclusive (even as to Yahoo!) as to certain algorithmic search and paid search services in the Field of Use. Upon termination or expiration of the Search Agreement, the Technology License will remain in effect but will become non-exclusive.

Limited Non-Exclusive Patent Cross License

During the Term, Yahoo! will grant to Microsoft a worldwide, non-exclusive limited patent license solely for Microsoft to provide services in the Field of Use to Yahoo!; and Microsoft will grant to Yahoo! a worldwide, non-exclusive limited patent license for Yahoo! to use and implement the services provided by Microsoft, as contemplated by the Search Agreement (the “Limited Patent Cross License”). The Limited Patent Cross License terminates upon the termination of the Search Agreement.

Patent License Option

Microsoft will also have an option to obtain from Yahoo! a worldwide, non-exclusive license under Yahoo!’s patents for Microsoft to provide online services in the Field of Use both with Microsoft’s owned and operated websites and to third parties (”Patent License”). The option will expire upon the earlier of July 29, 2011 and the date six (6) months following the Commencement Date. Should Microsoft exercise its option to obtain the Patent License, Microsoft will pay for such Patent License at a specified discount from fair market value. Such Patent License will also terminate upon termination of the Search Agreement.

Yahoo! may terminate the Patent License if Microsoft files an infringement action against Yahoo!, Yahoo! subsidiaries or Yahoo! joint venture relationships. Termination of the Patent License does not affect Microsoft’s obligations under the Search Agreement.

Assignment and Transfer

Microsoft may not assign the License Agreement without Yahoo!’s permission. Assignment or transfer of the licensed technology will be subject to the licenses. Neither party is prevented or restricted from licensing, selling or otherwise disposing of any of its patent assets, and Microsoft’s option to obtain the Patent License will not apply to any patents sold or otherwise disposed of by Yahoo! prior to the exercise of the option.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

YAHOO! INC. (Registrant)
By: /s/ Michael J. Callahan
Name: Michael J. Callahan
Title: Executive Vice President, General Counsel and Secretary
Date: August 4, 2009

[UPDATED: With news that employees can sell up to 20 percent of their shares.]

According to sources close to the situation, current and former employees of Facebook are now going to be able to sell up to 20 percent of their common shares.

It is part of a $100 million add-on investment in the social networking company by the Russian investors who recently put $200 million into the company for preferred shares.

That investment a month ago by Digital Sky Technologies was valued at $10 billion, since those shares have various special rights, depending on what was negotiated.

The new tender offer by DST values the company at $6.5 billion for the common shares, or $14.77 a share. The last common share valuation of the company was around $4 billion.

The move has been expected for Facebook employees since DST made its first investment.

It will allow them to monetize shares, since the company is not likely to go public for at least a year or more.

Employees have 20 days to decide to take the offer or not and can only sell up to 20 percent of their stock–in other words, they cannot cash out completely.

“I can afford a down payment on a house now,” said one longtime employee, who is typical of many. “But not a really big house.”

But the top leadership of Facebook, such as CEO Mark Zuckerberg or COO Sheryl Sandberg, are not eligible to sell shares.

Facebook confirmed the DST investment, with a statement from Zuckerberg:

“While individuals must make their own decisions about participating in this program, I’m pleased that the price DST is offering is much greater than the price originally considered last fall. This is recognition of Facebook’s growth and progress towards making the world more open and connected.”

If fully accepted by those employees eligible, it will give DST 1.54 percent more of Facebook, for a total of 3.5 percent of the company.

That makes DST–based in London and Moscow–one of the bigger Facebook investors, with a stake larger than one owned by Microsoft (MSFT).

The software giant invested $250 million in Facebook for preferred shares in 2007, but the valuation was then $15 billion. That huge figure was due to a competing bid from archrival Google (GOOG) at the time.

In any case, neither DST nor Microsoft got a board seat or “special observer rights” in return for its money.

Here’s a video interview I did with one of DST’s top execs, Alexander Tamas, along with Sandberg, right after it made its first investment in May, while both were attending the seventh D: All Things Digital conference:

]]> http://kara.allthingsd.com/20090713/facebookers-start-cashing-out-with-new-100-million-investment/feed/ 0 http://kara.allthingsd.com/20090623/confirmed-travis-katz-remains-at-myspace-as-international-head/ http://kara.allthingsd.com/20090623/confirmed-travis-katz-remains-at-myspace-as-international-head/#comments Wed, 24 Jun 2009 01:50:37 +0000 Kara Swisher http://kara.allthingsd.com/?p=14850

Earlier today, there was an odd little news kerfuffle around the status of MySpace international head Travis Katz, as the troubled social-networking site laid off 300 of its non-U.S. employees.

Last week, MySpace announced it was reducing its U.S. staff by 420 workers, in what has been a major restructuring for the News Corp. (NWS) unit.

Both TechCrunch and Media Week initially reported Katz was “out” in the shake-up. Then an update by TechCrunch later said he “may still be at the company” and, after that, said, “sources at MySpace are saying that Katz will remain with MySpace and that ‘his role hasn’t changed.’ The company will still not respond to an on-the-record request for comment about Katz.”

Well, to clear up the is-he-is-or-is-he-ain’t question, as a longtime practitioner of non-“process” journalism–which some bloggers have been calling posting information, right or wrong, as a story develops–it turns out Katz is definitely not leaving in the current shake-up.

I easily managed to reach Katz and other top MySpace execs by phone and email and they all confirmed on the record that he remains international head.

“I [am] still around in the same job,” wrote Katz from London.

Of course, it is a much different job with an obviously decimated staff–an organization that Katz was key to building over the last several years. Indeed, the changes today are clearly tough for everyone there.

But, although sticking around long term seems unlikely, Katz is still at MySpace–at least for the moment.

Here’s a video interview I did with Katz back at the end of 2007, when he was about two years into his job.

(Full disclosure: News Corp. owns Dow Jones, which owns this site.)

]]> http://kara.allthingsd.com/20090623/confirmed-travis-katz-remains-at-myspace-as-international-head/feed/ 0 http://kara.allthingsd.com/20090529/detailed-notes-from-ceo-armstrongs-all-hands-meeting-for-aol-staff-today/ http://kara.allthingsd.com/20090529/detailed-notes-from-ceo-armstrongs-all-hands-meeting-for-aol-staff-today/#comments Fri, 29 May 2009 23:24:22 +0000 Kara Swisher http://kara.allthingsd.com/?p=14032

After officially announcing that AOL was going to be spun off yesterday, Tim Armstrong, the CEO of the Time (TWX) Warner online unit, held an all-hands meeting for employees today.

BoomTown reported the details of the new structure of AOL yesterday, which Armstrong discussed at the gathering.

Here is a quick synopsis of the meeting, which included a focus on content, advertising and making AOL’s acquisitions work better via a new venture unit.

Several employees I spoke to said Armstrong–who was a former top Google (GOOG) advertising exec, which–not surprisingly–seems to be a strong influence on him–did a good job.

Staffers said they were glad for the vision that Armstrong displayed, which some at the company think has been lacking in recent years.

Here’s a rundown of several key points:

The Google-ization of advertising: AOL’s Platform-A, including its valuable Advertising.com unit, will focus on many more customers, rather than a few big ones.

That includes having more of a self-service model, more like Google.

Content is king: Armstrong stressed content, which comes from AOL’s MediaGlow content unit, run by Bill Wilson.

Content will be a key focus at AOL, which has been investing heavily in media sites over the last several years.

Sink-or-swim start-ups: AOL’s acquisitions–such as the overpriced Bebo social networking unit–have to live and die on their own in a new AOL Ventures Group.

Some will be spun out and some will be sold, but all have to survive by their wits.

Internet company values: Compensation, which has been hindered by Time Warner’s ownership, will be based on how Web companies compensate.

That means stock options and equity, but also more risk and innovation on the part of employees.

]]> http://kara.allthingsd.com/20090529/detailed-notes-from-ceo-armstrongs-all-hands-meeting-for-aol-staff-today/feed/ 4 http://kara.allthingsd.com/20090421/liveblogging-the-yahoo-earnings-conference-call-it-depends-on-your-definition-of-what-wow-is/ http://kara.allthingsd.com/20090421/liveblogging-the-yahoo-earnings-conference-call-it-depends-on-your-definition-of-what-wow-is/#comments Tue, 21 Apr 2009 21:19:09 +0000 Kara Swisher http://kara.allthingsd.com/?p=12605

A major Yahoo investor yesterday told me that he liked what he saw so far from new Yahoo CEO Carol Bartz, but he still remained wary.

“I like the sizzle,” he said, referring to Bartz’s decisive take-no-prisoners style. “But I am still waiting to see if steak is there too.”

Well, Bartz handed over some tough news to chew on today, announcing Yahoo’s first-quarter earnings, which were just as weak as expected.

The company reported an eight-cent-per-share profit, down from 37 cents a year ago, a 78 percent drop.

Revenue in the quarter came in at $1.6 billion, a 13 percent decline from last year’s $1.8 billion.

And Yahoo (YHOO) also said it would cut five percent of its staff of 13,600, which means layoffs of close to 700 employees.

BoomTown liveblogged the Yahoo earnings conference call, with Bartz and outgoing CFO Blake Jorgensen.

(Bartz, well known for her ribald words and sassy phrases, lobbed several, and also tossed out a small F-bomb at the very end of the conference call, so read on to the bottom.)

2:04 p.m.: The call started off a few minutes late, but who can blame Yahoo, given the poor results? But Bartz finally came on the call with an upbeat tone.

“What an amazing and busy three months it’s been,” she said, outlining what she had learned so far on her whirlwind visits across the Yahoo empire and “deep dives” into the products and services of the troubled Internet giant.

“The most important takeaway was the importance of having a ‘Wow!’ experience,” concluded Bartz, who noted the definition of that particular enthusiasm was different, depending on who you were.

“Wow!” did not describe the earning results, to be sure.

But we pressed on.

2:08 p.m.: Bartz noted that Yahoo remained focused on investment and also renewed investment in the company.

She pointed to content, email, search and advertising as key building blocks of Yahoo and focused on three key goals:

1) Globalizing the Yahoo platform

2) Building “fantastic products” that deeply impact users

3) Investing in “industry-leading” online ad solutions

You know, getting back to basics of exactly what made Yahoo great before.

2:09 p.m.: Bartz complimented Yahoo CTO and Product head Ari Balogh, as well as other current Yahoo staff at the Silicon Valley-based company.

Then she announced that Yahoo had hired Jeff Russakow (pictured here) as its new customer advocacy head.

I am guessing he is now the key guy in charge of monitoring the “Wow!” level.

Russakow is currently VP of corporate strategy for Symantec, the online security software firm, which does not trumpet Yahoo! to me.

So, I wonder if Yahoo engineers should build a “Wow!” meter to help Jeff?

Bartz then noted that Yahoo has been and will continue to “slim down our portfolio,” while continuing in investing.

That would mean dumping the non-”Wow!”

2:11 p.m.: CFO Jorgensen hopped on, noting the “difficult economic environment.”

We noticed!

Jorgensen then proceeded to go through the unimpressive numbers for a while, in a voice that lulled me into a slight stupor. There was essentially no good news anywhere for Yahoo.

Then, he summed up and said goodbye, as he is leaving Yahoo soon and there will be a new CFO by the next quarter’s call. Jorgensen said he will be watching Yahoo “with interest.”

Blake! We hardly knew you! Call me anytime and we’ll chat and maybe have lunch (bring lots of internal memos!).

2:20 p.m.: Bartz complimented Jorgensen, although she did kind of “part ways” with him.

Then, finally, came a patented Bartzism, which is that special sassy phrase or ribald word, with her noting that users were looking for a “kick-ass” experience from Yahoo.

She obviously could not resist, which was a good instinct.

Bartz soon threw in a “freakin’” too.

Then, she non-answered anticipated questions about Yahoo’s talks with Microsoft over a search and advertising partnership by noting, “search is a very valuable asset for Yahoo.”

And that, she said, in a Forrest Gumpism, “is all we’re going to say about search today.”

Also, life is a box of chocolates.

2:25 p.m.: Bartz then discussed the economy, especially the impact on branded display advertising, which she said was not going to be killed off.

Brands were always important, she noted, and Yahoo could even help damaged brands revive themselves.

Like, um, maybe, Yahoo?

She closed the talking points part of the call on another upbeat note: “Let me say again how happy I am to be here.”

Us too, cuz Bartz is a definitely a live wire, as it later turned out.

(Bartz also announced an analysts day on Oct. 28.)

2:29 p.m.: Now began questions from said analysts (media folks are muted, of course).

The first was about ad price differences, which was dull.

The second, though, touched on the Microsoft (MSFT) talks, with someone essentially asking if Bartz was smart enough about search to be able to entertain an offer.

Well, what do you think she was going to say?

That’s right: “I am well versed enough in the search business to say it is critical to Yahoo.”

Bartz also noted that she thought advertisers prefer a combined search and display experience, which felt like she was channeling Yahoo EVP Hilary Schneider.

But Bartz also managed to keep the door open, saying–and I just know she had a mischievous smile while she said this–“Relative to anything else related to Microsoft, no comment.”

She was also not gaming the economy, noting that no one knows what will happen in the future.

“A wise person stays to the sides and lets the economists figure it out,” said Bartz.

As if!

2:33 p.m.: More questions were asked about costs and layoffs (sad!) and about ad inventory.

Bartz underscored the importance of its premium ad sales staff and placement over ad networks and randomness.

“Chanel does not want to end up next to Harley-Davidson. It kind of doesn’t work,” she asserted.

Well, it works for me! I mean, black leather and more black leather–what’s not to like?

2:39 p.m.: More about globalizing the Yahoo platform, which Bartz said would take a while.

“It’s not like flipping a switch,” she said. “This is work, this is not just words.”

Bartz also talked about how non-easy the current ad management systems at Yahoo are. Several times.

2:46 p.m.: A question then came about reinvestment, which was really about selling off stuff like the Asian assets.

No answers were forthcoming, although weak product groups are getting tossed off the good ship Yahoo quite quickly under Bartz.

More questions about the economy, the ad business and another attempt to find out about the Microsoft talks.

“Search is important,” to consumers and advertisers of Yahoo, Bartz underscored again, noting she was not going to fall for a “tricky” question.

Good lord, she’s a sharpie.

3:03 p.m.: Last up is a question about the investment in the global platform and the reorganization.

And, in the end, Bartz uttered the naughty word many had expected sooner.

It came when Bartz was on a roll about how engineers have been “scattered to the winds” at Yahoo and that there have been too many product managers overseeing things and annoying those windswept engineers.

She was dead right about this nagging issue at the company, as it has slowed down innovation and rollouts of key services and products.

“Nobody’s f#*king doing anything,” Bartz stated with apparent exasperation.

She tried to take it back quickly, adding, “I knew that would slip out some time.”

But Bartz should not take it back. Never ever.

In fact, most would agree that it was well past time that such an assessment should slip out of Yahoo.

]]> http://kara.allthingsd.com/20090421/liveblogging-the-yahoo-earnings-conference-call-it-depends-on-your-definition-of-what-wow-is/feed/ 0 http://kara.allthingsd.com/20090421/yahoo-first-quarter-results-are-as-meh-as-expected-will-cut-five-percent-of-staff-plus-the-full-press-release/ http://kara.allthingsd.com/20090421/yahoo-first-quarter-results-are-as-meh-as-expected-will-cut-five-percent-of-staff-plus-the-full-press-release/#comments Tue, 21 Apr 2009 20:36:50 +0000 Kara Swisher http://kara.allthingsd.com/?p=12603

Yahoo announced its first-quarter earnings today and results were in line with weak expectations.

The company reported an eight cent per share profit, down from 37 cents a year ago. It is a 78 percent drop, although last year Yahoo had unusual investment gains in the previous quarter.

Revenues in the current quarter was $1.6 billion, a 13 percent decline from last year’s $1.8 billion. Excluding sales Yahoo shares with its partners, called the TAC rate, the revenue was $1.16 billion, below the $1.2 billion estimates.

The company’s execs blamed the weak economy for the results, which has impacted display sales especially.

Yahoo (YHOO) also said it would cut five percent of its staff of 13,600, which is close to 700 employees. Other reports of layoffs had been much lower, although BoomTown reported here last week that Yahoo would cut 500 or more.

Those impacted will be notified within two weeks, Yahoo said.

In a conference call later, CEO Carol Bartz said the cuts were aimed at cleaning up inefficiencies at the company.

“Yahoo! is not immune to the ongoing economic downturn, but careful cost management in the first quarter allowed our operating cash flow to come in near the high end of our outlook range,” said Bartz in Yahoo’s press release on the earnings.

Shares of Yahoo were up 5.3 percent to $14.38 yesterday.

In the conference call, there there were questions about cost-cutting, including the additional layoffs, as well as about Yahoo’s talks with Microsoft (MSFT) about a search and advertising partnership.

Going forward, the Silicon Valley-based company estimated that revenue would be between $1.43 billion and $1.63 billion, higher than Wall Street had been expecting.

Here is the entire press release:

Yahoo! Reports First Quarter 2009 Results

April 21, 2009 4:20 PM EDT

SUNNYVALE, Calif.–(BUSINESS WIRE)– Yahoo! Inc. (NASDAQ: YHOO) today reported revenues of $1,580 million for the quarter ended March 31, 2009, a decrease of 13 percent from the first quarter of 2008. Excluding the impact of currency rate fluctuations, revenues for the first quarter of 2009 would have declined 8 percent from the first quarter of 2008. The Company’s non-GAAP operating cash flow for the first quarter of 2009 of $409 million exceeded the midpoint of the outlook range provided by the Company last quarter.

Marketing services revenues declined 12 percent and fees revenues declined 20 percent. As expected, revenues were reduced by the effects of currency rate fluctuations, the sale of Kelkoo and lower fees revenues from broadband partnerships, voice-over IP services and subscription music offerings. Excluding the effects of these items, revenues would have declined 3 percent. Net income per diluted share in the first quarter of 2009 was $0.08, compared to $0.37 in the first quarter of 2008. Net income for the first quarter of 2008 included a non-cash gain of $401 million, or $0.29 per diluted share, related to Alibaba Group’s initial public offering of Alibaba.com, net of tax. Non-GAAP net income per diluted share in the first quarter of 2009 was $0.15, compared to non-GAAP net income of $0.18 per diluted share in the first quarter of 2008. Non-GAAP net income per diluted share excludes stock-based compensation expense, costs for advisors, restructuring charges, net, and the non-cash gain related to Alibaba.com.

“Yahoo! is not immune to the ongoing economic downturn, but careful cost management in the first quarter allowed our operating cash flow to come in near the high end of our outlook range,” said Yahoo! chief executive officer Carol Bartz. “While we experienced pressure in both display and search advertising in the first quarter, we believe Yahoo! remains one of the most compelling advertising buys on the Internet. With our leading audience properties, substantial reach and innovative advertising solutions, we are confident Yahoo! will be well positioned when online brand advertising resumes its growth.”

“Yahoo!’s balance sheet remains strong, and we are continuing to generate free cash flow which provides us with the flexibility to make strategic investments in key talent, platforms, products and infrastructure, even during this economic downturn,” said Yahoo! chief financial officer Blake Jorgensen. “We also are making selective adjustments to our spending to accelerate those strategic investments.”

Revenues

— Marketing services revenues from Owned and Operated sites were $872
million for the first quarter of 2009, a 10 percent decrease compared to
$966 million for the same period of 2008. The decrease was driven by a 3
percent decline in search advertising revenue and a 13 percent decline
in display advertising revenue.

— Marketing services revenues from Affiliate sites were $511 million for
the first quarter of 2009, a 16 percent decrease compared to $606
million for the same period of 2008. The decrease was driven primarily
by Yahoo!’s efforts to improve traffic quality and lower revenue per
search.

Cash Flow and Cash Balance

— Cash flow from operating activities for the first quarter of 2009 was
$262 million, a 67 percent decrease compared to $786 million in the same
period of 2008. Cash flow from operating activities for the first
quarter of 2008 included a $350 million one-time payment from AT&T Inc.

— Free cash flow for the first quarter of 2009 was $214 million, a 67
percent decrease compared to $647 million in the same period of 2008.
Free cash flow for the first quarter of 2008 included a $350 million
one-time payment from AT&T Inc.

— Cash, cash equivalents and investments in marketable debt securities
were $3,691 million at March 31, 2009 compared to $3,522 million at
December 31, 2008, an increase of $169 million.

Cost Initiatives

To allow flexibility for accelerated strategic investments and targeted hiring in its core operations, Yahoo! expects to reduce its number of current employees worldwide by approximately five percent. The majority of impacted employees are expected to be notified within the next two weeks. The Company is also continuing to implement non-headcount cost reductions.

Business Outlook

GAAP revenue for the second quarter of 2009 is expected to be in the range of $1,425 million to $1,625 million. Non-GAAP operating income before depreciation, amortization, and stock-based compensation expense for the second quarter of 2009 is expected to be in the range of $375 million to $425 million. Income from operations for the second quarter of 2009 is expected to be in the range of $80 million to $90 million.

Conference Call

Yahoo! will host a conference call to discuss first quarter 2009 results at 5:00 p.m. Eastern Time today. A live webcast of the conference call, together with supplemental financial information, can be accessed through the Company’s Investor Relations website at http://yhoo.client.shareholder.com/results.cfm. In addition, an archive of the webcast can be accessed through the same link. An audio replay of the call will be available for one week following the conference call by calling (888) 286-8010 or (617) 801-6888, reservation number: 29476596.

Note Regarding Non-GAAP Financial Measures

This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (”SEC”): revenues excluding traffic acquisition costs or TAC; operating income before depreciation, amortization, and stock-based compensation expense (also referred to as operating cash flow); free cash flow; and non-GAAP net income and non-GAAP net income per share. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (”GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Statements of Income,” “Reconciliations to Unaudited Condensed Consolidated Statements of Income,” “Reconciliation of GAAP Net Income and GAAP Net Income Per Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share” and “Business Outlook.”

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