Yahoo! Loses Mallett, Beats Estimates

It’s a mixed bag of news for Web portal Yahoo, which on Wednesday reported the resignation of president and chief operating officer Jeff Mallett while posting better-than-expected quarterly and yearly results.

Sunnyvale, Calif.-based Yahoo said only that Mallett’s departure came as a result of his desire “to take advantage of greater flexibility for family and business interests.”

Many industry-watchers had expected that the highly-regarded Mallett, who joined the company in 1995 as its twelfth employee, would succeed former chief executive Tim Koogle, who announced his resignation in March. A month later, however, the Web portal brought in former Warner Bros. studio head Terry Semel to fill the top post.

Mallett will stay on through April, and will also continue as a member of the board of directors until the company’s annual stockholder meeting in spring. The company also promised that it would have a succession plan in place before Mallett’s departure.

Ironically, Mallett’s resignation comes as the company not only posted a relatively healthy quarter for the battered dot-com industry, but also beefed up its guidance for next year.

For fourth quarter, Yahoo posted revenues of $188.9 million, leading to a net loss of $7.8 million, or $0.02 per share. Minus one-time charges, the company posted a profit of $16.7 million, or $0.03 per share — topping Wall Street’s expectations of a penny per share pro forma profit, according to Thomson Financial/First Call estimates. (Last quarter ,Yahoo posted a net loss of $24.1 million, on $166.1 million in revenue. On a pro forma basis, the firm posted a profit of $8.4 million, or $0.01 per share in third quarter.)

For all of 2001, the company saw a net loss of $92.8 million, or $0.16 per share, on $717.4 million in revenue. That’s down sharply from the $1.1 billion Yahoo saw in revenue for all of 2000. On a pro forma basis for the full year, the company posted a profit of $41.4 million, or $0.07 per share, versus $291.0 million, or $0.48 per share, in 2000. Analysts had forecasted a lower, $0.05 per share profit.

Yahoo management also raised its full-year 2002 guidance. Now, revenue is expected to come in between $750 million and $800 million, and pro forma earnings between $70 million and $100 million. Previously, the company anticipated between $725 and $775 million in revenue, leading to pro forma earnings of $35 million to $65 million.

Theoretically, at least, there’s also the potential for still more improvements in guidance. The new guidance doesn’t reflect the integration of career site HotJobs, which Yahoo agreed to purchase in December, and which Semel has said would be an important source for advertising and specialized software sales.

Yahoo also said it plans to continue striking deals similar to its November agreement with SBC Communications, under which it will provide DSL Internet access in co-branded, bundled packages.

Executives attributed the company’s strong performance and revised outlook to fundamental changes in its business model — including the addition of new ad products like sponsored search listings through a deal with Overture and the hiring of new, experienced sales talent to boost relationships with advertisers.

But Yahoo also owes a great deal to Semel’s efforts to diversify the company. The new agreements with Overture and SBC, and new paid products like Yahoo Personals, have helped Yahoo to lower its advertising dependency, such that ad sales now make up only 75 percent of its revenue, down 5 percent from last quarter.

In November, Semel promised that in 2002, the company would achieve a half-and-half ratio of advertising and non-advertising revenues — a move that would insulate the firm from continued softness in the advertising sector.

“While 2001 was a year of challenges and transition, Yahoo adapted and executed to end the year on a high note,” Semel said. “As we reorganized the business and reduced costs throughout the year, Yahoo managed through the difficult environment. We continue to focus on long-term growth as we execute our strategy of building a diversified global business.”

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