Last Updated Jan 25, 2011 6:53 PM EST
According to the earnings release, revenue was down. How far down depends on what measure you want to use. Revenue excluding traffic acquisition costs is only a 4 percent drop, year over year. If you prefer GAAP results, it's 12 percent down.
Yahoo blamed the loss on sharing search revenue with Microsoft (MSFT) as part of the search deal the two announced in July 2009. However, under that deal, Microsoft was to compensate Yahoo for revenue loss. Microsoft only started serving the search ads late in October 2010, so the drop had to have occurred between November and December.
A honking big loss
Holy self-served ad system, Batman, that's a honking big loss when Yahoo was supposed to get annual benefits of $500 million improvement in operating income and capital expenditure savings of $200 million within two years of regulatory approval. That approval came last February. So, is this like the mythical sales hockey stick effect, where the benefits all suddenly appear like a financial cavalry to save the day?
Operating income was up 85 percent year over year, to be fair. But that's from cutting costs, not from expanding the business, and it's the latter the company needs. Right now, the drop in search revenue more than made up for the gain in display ad revenue that CEO Carol Bartz wanted to focus on.
Too bad, because improving margins and eking out more earnings won't help if the revenue doesn't start to expand. (And the company even projects a drop in operating income for this quarter.) Yahoo has a stagnant strategy and direction. It needs to do something that will be a viable and growing business in the future.
Unfortunately, Yahoo doesn't know what that step is. Neither do you or I, but neither of us was named most overpaid CEO last year. Now here's an idea. Bartz sees herself as a Steve Jobs. So why not follow the Apple playbook and let her take only $1 in salary and no additional stock grants? If she can get the company on its feet, then she can get paid for what she did, not what she said she could do if only people were patient.
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