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"Despite a tougher revenue climate, we were able to stay focused on our strategic objectives, launching several major product initiatives that have been underway for many months," said Sue Decker, president, Yahoo!, Inc. "These include the beta release of our new home page, which will leverage one code base globally; our new universal profile management tool at profiles.yahoo.com which is the first step toward rewiring the social graph on Yahoo!; and the launch of APT from Yahoo!TM, a transformative digital advertising platform. We delivered on our product roadmap with high quality and lower expenses than originally anticipated. Now we are conducting a deep review of our cost structure to identify more opportunities to enhance efficiency and build a stronger and more profitable Yahoo!."
Third Quarter 2008 Segment Financial Results
- United States segment revenues for the third quarter of 2008 were $1,280 million, a 7 percent increase compared to $1,195 million for the same period of 2007.
- International segment revenues for the third quarter of 2008 were $507 million, a 12 percent decrease compared to $573 million for the same period of 2007.
- United States segment operating income before depreciation, amortization, and stock-based compensation expense for the third quarter of 2008 was $291 million, a 14 percent decrease compared to $338 million for the same period of 2007.
o United States segment operating income before depreciation, amortization, and stock-based compensation expense for the third quarter of 2008 includes the incremental costs related to the strategic alternatives and related matters noted above.
- International segment operating income before depreciation, amortization, and stock-based compensation expense for the third quarter of 2008 was $119 million, a 7 percent decrease compared to $128 million for the same period of 2007.
"An increasingly challenging economic climate and softening advertising demand contributed to revenues this quarter coming in at the low end of our outlook range. While we are disappointed with our results, we're pleased that we continue to benefit from the aggressive cost management efforts we have pursued during the year. These efforts helped our adjusted operating cash flow come in above the midpoint of our outlook range for the quarter, despite significant investments in our strategic objectives," said Blake Jorgensen, chief financial officer, Yahoo! Inc. "We have the balance sheet strength, liquidity, and free cash flow we need to continue to make progress on our core strategies as we address this slowdown."
Cash Flow Information
In addition to free cash flow of $215 million for the third quarter of 2008, Yahoo! generated $14 million from the issuance of common stock as a result of the exercise of employee stock options. This was offset by $29 million used for acquisitions and $16 million used to acquire intellectual property rights. Cash, cash equivalents, and investments in marketable debt securities were $3,299 million at September 30, 2008 as compared to $3,219 million at June 30, 2008, an increase of $80 million.
Cost Reduction Initiatives
During the third quarter, Yahoo! began implementing a series of cost reduction initiatives that contributed to the Company's adjusted operating cash flow exceeding the midpoint of its outlook for the quarter. The Company's goal is to reduce its current annualized cost run rate of approximately $3.9 billion by more than $400 million before the end of 2008. The Company anticipates that both headcount and non-headcount related costs will be reduced by these actions. Because the majority of expenses are headcount-related,
Yahoo! expects to reduce its global workforce by at least 10 percent during the fourth quarter of 2008. Yahoo! also plans to implement additional cost-cutting measures aimed at achieving additional structural efficiencies over the next year. The Company anticipates these will result in substantial additional cost savings. The goal of these measures is to position Yahoo! for long-term, sustainable growth.
