Yahoo! Trimming 12% of Jobs

Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) Wednesday beat twice-lowered first-quarter earnings expectations, set plans to lay off about 400 workers and said a key international executive would depart, adding to the Internet giant's recent brain drain. The stock rallied.

For the quarter ended March 31, Yahoo! reported earnings of 1 cent a share, down from the year-ago 10-cent profit. Analysts surveyed by Thomson Financial/First Call called for a breakeven quarter. Sales fell to $180.2 million from $230.8 million a year earlier; analysts expected sales of $172.4 million.

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The company also said it would cut 12% of jobs from its 3,510-worker payroll. Meanwhile, Heather Killen, senior vice president of international operations, is expected to leave the company in mid-June. Killen has been a key leader in developing Yahoo!'s non-U.S. operations, the company said.

Yahoo! also guided earnings and revenue estimates slightly lower for coming periods. The company forecast a breakeven second quarter on revenue of $165 million to $185 million, and 2001 earnings of 2 to 6 cents a share on revenue of $700 million to $775 million. Analysts had forecast second-quarter earnings of a penny a share on revenue of $183 million, and 2001 earnings of 6 cents on revenue of around $790 million.

Yahoo! shares rallied slightly on the news, adding 64 cents to $16.50 in after-hours Instinet trading.

Wednesday's results come as Yahoo! tries to adjust to the collapsing Internet advertising market, which fueled the company's growth last year until dot-com customers finished running through their bank accounts. Yahoo! first lowered first-quarter guidance in January, back when the analyst consensus was that Yahoo! would report a first-quarter profit of 13 cents a share on revenue of $325 million.

Going into Wednesday evening's earnings announcement, analysts were hoping for 2001 earnings of 6 cents a share, on revenue of about $790 million. Those numbers would be well below 2000's earnings, at 48 cents, and revenue, $1.1 billion. Back in January, analysts were hopeful that the company would earn 57 cents per share on revenue of $1.4 billion.

On March 7, when Yahoo! warned about its performance for the second time in two months, Chief Financial Officer Sue Decker alluded to a goal of "break-even profitability" for the year, without formally bringing down estimates. At the time CEO Tim Koogle warned that the company had little ability to predict its financial performance in the second half of 2001.

Since Koogle's announcement in early March that he would step down, investors have been wondering who his replacement might be.

And given the company's shrinking revenues and disappearing operating profits, analysts had speculated, going into the conference, that the heretofore-layoff-averse Yahoo! might cut staff to help rein in its expenses.

Ahead of the report, Yahoo! shares slipped 16 cents to $15.86.