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Yahoo Q2 2008 Disappoints Wall St.

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Yahoo Second Quarter 2008 Financial Results
• Revenues were $1,798 million for the second quarter of 2008, a 6 percent increase compared to $1,698 million for the same period of 2007.

• Marketing services revenues were $1,587 million for the second quarter of 2008, a 7 percent increase compared to $1,486 million for the same period of 2007.

“Yahoo!'s transformation gained momentum in the second quarter as we announced new product initiatives and partnerships along with solid financial results,” said Sue Decker, president Yahoo! in a statement. “We advanced our position with users by opening up Yahoo! through new innovative offerings like SearchMonkey and BOSS in search and have seen great improvements with Buzz in the freshness of content on our home page. Our commercial agreement with Google is another great example of our open strategy and we expect it will strengthen our competitive position as a leading provider of search and display advertising. On the advertising side, our growing list of major agency partners including Publicis, WPP, Havas and premier publishing partners including walmart.com, and CNET and Turner are great examples of our ability to be the partner of choice across search and display advertising. We remain confident that our efforts will lead to a stronger and more profitable Yahoo!.”

o Marketing services revenues from Owned and Operated sites were $1,016 million for the second quarter of 2008, a 14 percent increase compared to $892 million for the same period of 2007.

o Marketing services revenues from Affiliate sites were $571 million for the second quarter of
2008, a 4 percent decrease compared to $594 million for the same period of 2007.

• Fees revenues were $211 million for the second quarter of 2008, a less than 1 percent decrease compared to $212 million for the same period of 2007.

• Revenues excluding traffic acquisition costs (“TAC”) were $1,346 million for the second quarter of 2008, an 8 percent increase compared to $1,244 million for the same period of 2007.

• Operating income for the second quarter of 2008 was $101 million, a 45 percent decrease compared to $185 million for the same period of 2007.

o Operating income for the second quarter of 2008 includes incremental costs of $22 million
incurred for outside advisors related to Microsoft's proposals to acquire all or a part of the
Company, other strategic alternatives, the proxy contest, and related litigation defense costs.

• Free cash flow for the second quarter of 2008 was $231 million, a 30 percent decrease compared to $328 million for the same period of 2007.

• Net income for the second quarter of 2008 was $131 million or $0.09 per diluted share compared to $161 million or $0.11 per diluted share for the same period of 2007.

“Despite a difficult economic environment, we posted solid results in line with the ranges we indicated in April,” said Blake Jorgensen, chief financial officer, Yahoo! in a statement. “GAAP revenue was $1.8 billion, with operating cash flow on a normalized basis coming in at $449 million. Our diverse advertiser base and compelling value proposition for our customers were key factors behind Yahoo!'s strong second quarter performance.”


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