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Yahoo Releases Q4 and Full Year 2005 Earnings

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The complete Yahoo Q4 and Full Year 2005 Earnings news release is available here (11 page PDF).

From the news release:
"In 2005, Yahoo! continued to achieve significant results by providing some of the most innovative services to our hundreds of millions of consumers and deepening both our global reach and user engagement. As we look ahead, we will continue to focus on creating the best consumer experience, finding new ways to engage our audience and delivering the best value for our advertisers."
--Terry Semel, chairman and chief executive officer, Yahoo

Numbers Summary via Dow Jones

Yahoo Inc. fourth-quarter profit surged 83% as advertisers continued to shift spending to the Internet, but it wasn't enough to produce a profit that lived up to lofty expectations for the Web's most heavily trafficked destination.

The Sunnyvale-based company said Tuesday that it earned $683.2 million, or 46 cents a share, during the three months ended in December. That compared with net income of $372.5 million, or 25 cents a share, at the same time in 2004.

The 2005 results included a large accounting gain triggered by a complex deal that left Yahoo with a 40% stake in Alibaba.com, China's largest e-commerce company.

If not for that gain and other items unrelated to its ongoing operations, Yahoo (YHOO) said it would have earned 16 cents a share. That figure fell a penny below the average estimate among analysts polled by Thomson Financial.

From the WSJ:

Yahoo's adverting and listing-related revenue for the quarter was $1.32 million, up 39% from $942.9 million a year ago. These marketing services comprised 88% of the company's total revenue.

Revenue from premium offerings, such as broadband services bundled with high-speed Internet access, rose to $186 million, up 38% from $135 million.

Basic Numbers, Q4 2005 via News Release
+ Net Income
Net income for the fourth quarter of 2005 was $683 million or $0.46 per diluted share compared to $373 million or $0.25 per diluted share for the same period of 2004. Adjusted net income for the fourth quarter of 2005 was $247 million or $0.16.

+ Revenues
Revenues were $1,501 million for the fourth quarter of 2005, a 39 percent increase compared to $1,078 million for the same period of 2004.
+++ Marketing services revenue was $1,315 million for the fourth quarter of 2005, a 39 percent increase compared to $943 million for the same period of 2004.
+++ Fees revenue was $186 million for the fourth quarter of 2005, a 38 percent increase compared to $135 million for the same period of 2004.
Revenues excluding traffic acquisition costs (?TAC?) were $1,068 million for the fourth quarter of 2005, a 36 percent increase compared to $785 million for the same period of 2004.

+ Segments
++ United States revenues for the fourth quarter of 2005 were $1,056 million, a 36 percent increase
compared to $775 million for the same period of 2004.
++ International revenues for the fourth quarter of 2005 were $445 million, a 47 percent increase
compared to $303 million for the same period of 2004.
++ United States segment operating income before depreciation and amortization for the fourth quarter of
2005 was $352 million, a 26 percent increase compared to $278 million for the same period of 2004.
++ International segment operating income before depreciation and amortization for the fourth quarter of
2005 was $107 million, a 118 percent increase compared to $49 million for the same period of 2004.

2005 Overall
Net income for 2005 was $1,896 million or $1.28 per diluted share compared to $840 million or $0.58 per diluted share for 2004. Adjusted net income for 2005 was $854 million or $0.58 per diluted share compared to $525 million or $0.36 per diluted share for the same period of 2004.

Other Facts and Comments
+ Via the WSJ on Microsoft Moving to Its Own Advertising:

Microsoft Corp.'s MSN search unit is decreasing its reliance on Yahoo's search-advertising services this year, which will reduce Yahoo's revenue by about $25 million to $50 million in the first half of 2006, said Chief Financial Officer Susan Decker.

Via the AP:

"Frankly, Google has done a better job than us," Yahoo Chairman Terry Semel acknowledged during a Tuesday interview.

Semel has been promising to introduce improved advertising algorithms later this year, a pledge he reiterated Tuesday. But he stressed it will be a gradual process that's unlikely to have a significant impact on Yahoo's earnings until 2007.

Via Marketwatch.com on Yahoo Subscriber Numbers and Projections

Yahoo CEO Terry Semel said on a conference call following the release that Yahoo ended 2005 with 12.6 million paying subscribers. This surpasses Yahoo's objective to attract more than 12 million paying subscribers.

Chief Financial Officer Susan Decker said on the same call that Yahoo expects to have 16 million relationships with paying users by the end of 2006.

Via IBD

"We have the right people, resources and strategy to continue to take advantage of the significant opportunities ahead," he [Semel] said.

More Resources
A replay of the conference call is available here. Slides used during the call are also online.

Look for a detailed written review of the conference call from 123Jump.com very soon.

Postscript:
Thanks to Nielsen//NetRatings for sharing the following Yahoo advertising and traffic metrics with us.

* Yahoo's estimated advertising revenue generated through image-based ads grew 62 percent from Q4 2004 to Q4 2005, and rose 38 percent from Q3 to Q4 2005.

* Impressions for Yahoo's sponsored search links rose four percent from September to December 2005.

* Yahoo's overall traffic across its Web properties rose 9 percent to 103.5 million unique Web users from Q4 2004 to Q4 2005, reaching approximately 68 percent of the Web's active users.

I've posted these numbers and three tables with additional info here.


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