Google Inc plans to let its cash “pile up” as it weathers an economic recession but doesn’t expect to see a fall in revenue, the Web search leader’s Chief Executive Eric Schmidt said on Wednesday.

Google will only use its $8.6 billion cash cushion for “very very conservative investments,” Schmidt said, and is unlikely to start a dividend in the current environment.

“We’ve not really discussed a dividend payment,” he said in an interview on the sidelines of the Wall Street Journal ECO:nomics conference in Santa Barbara, California. “At the moment our view is to let the cash pile up.”

Earlier on Wednesday, Schmidt said the economic storm will affect all forms of advertising, including the online ads that Google depends on, but that Google was unlikely to see a drop in revenue.

“We don’t predict things like that,” Schmidt said in a CNBC television interview when asked if the company’s diversity would shield it from the economic slowdown.

But, he added, “from my perspective it’s hard to imagine why you’d see a decline.”

Schmidt also said Google continues to look at acquisition opportunities, but said he wasn’t sure that prices were at their lows yet, or that the economic slowdown has reached its bottom.

Schmidt’s comments came a day after he raised eyebrows at an investor conference by referring to privately held online messaging service Twitter as a “poor man’s email system.”

Asked about speculation that the comments were part of a negotiating tactic by Google in hopes of acquiring Twitter, Schmidt said he didn’t want to speculate on buying or selling companies.

“We admire Twitter,” Schmidt said.

Source: Yahoo & Reuters

Brand-new Chief Executive Carol Bartz deserves exactly zero blame or credit for the fourth-quarter financial results Yahoo will announce Tuesday afternoon, but the judgment of her abilities will begin in earnest when she bears the Internet pioneer’s tidings.

That’s because Bartz so far has spent only 20 minutes on the phone with analysts as Yahoo’s CEO, much of that spent setting a straight-talking, no-nonsense tone while avoiding any real discussion of Yahoo’s position. The post-earnings call will be her opportunity to share her first assessment of the company and any plans she has for it.

However, one source familiar with Yahoo’s plans for the call cautions against expecting some detailed recipe for turning around the company. Yahoo may have hired Bartz with relative alacrity, but the source said it’s still “way too early” for her to reveal more than a few hints at what she has in mind for the company.

Bartz has the formidable task of rebuilding Yahoo before her. Former CEO Jerry Yang worked at it for a year and a half, laying some foundations such as Yahoo Open Strategy and the Apt system for handling display ads, but Yahoo now must show progress in actually improving revenue, net income, and share price. Worse, the company must do it during a recession.

Analysts surveyed by Thomson Reuters expect gloomy news. Revenue, excluding ad commissions called traffic acquisition costs paid to publishing partners, should drop 2 percent to $1.37 billion. Earnings per share, excluding various items, are expected to drop 14 percent to 13 cents per share.

One of the big trends to check is how well Yahoo is doing with its two kinds of advertising. First is search ads, the sponsored text that appears next to search results and the market Google dominates. It was a relative bright spot in Yahoo’s third quarter, Google was relatively unaffected, and Microsoft reported its search-ad revenue grew double digits in the fourth quarter, so this could offer some modest grounds for optimism.

Second is display ads, the typically graphical variety that Yahoo relies on much more heavily. Unlike search ads, which advertisers pay Yahoo for only when users click them, display ads cost money when they’re shown. That makes it harder to attribute revenue directly to them, so advertisers who depend on a provable return on investment get cold feet faster during tough economic times.

“We think display performance will be weak, but estimates already reflect this,” said J.P. Morgan analyst Imran Khan and his colleagues in a research note Monday.

And things just get worse in the future: The outlook for the first quarter of 2009 is “likely to be poor,” Khan said. “With so much uncertainty surrounding fiscal 2009, we think advertisers will be most conservative with ad spend in the first quarter.”

Analysts, shareholders, and press won’t be the only ones looking for signals Tuesday. Yahoo employees also likely will be eager to watch the show. So far, Bartz’s internal mass communications haven’t been too revealing. The only really meaty part of a memo sent after Bartz’s first week, according to a copy posted by Kara Swisher at All Things D was this edict: “I wasn’t too happy to see some ‘inside sources’ quoting my all-hands comments to the outside press–STOP IT!”

Employees got a taste of fiscal discipline early in Bartz’s tenure: Yahoo suspended pay raises last week. Work on that plan began before Bartz arrived, but she was involved in signing off on it, according to a source familiar with the situation. Freezing salaries rarely helps morale, but neither do diminishing profitability, commercial irrelevance, and more layoffs, so the move isn’t a surprise under the circumstances.

The biggest unknown for Yahoo is the extent to which the company will go it alone. Here, again, don’t expect much guidance from Bartz yet.

Yahoo famously spurned a $33-per-share acquisition offer from Microsoft last year, and having Bartz now in charge could well facilitate some sort of Microsoft deal. But don’t bet on any news in this department Tuesday. Microsoft has moved more toward acquiring just Yahoo’s search assets, and The Wall Street Journal quoted Bartz during an employee meeting as saying her “gut” leaned against it. In any event, there are plenty of board members at Yahoo who were also disinclined last year to sell the search asset, so Bartz isn’t the sole factor.

Having the Microsoft possibilities gives Yahoo investors something of a security blanket, if not a guarantee of a big return. And Bartz’s arrival notwithstanding, some believe it’s still how the Yahoo saga will end.

“While fundamentals remain challenging for the company, the possibility of a merger or accretive deal with Microsoft keeps a floor in the stock,” said American Technology Research analyst Rob Sanderson. “We continue to believe this is the ultimate outcome.”

Source: CNET News – Posted by Stephen Shankland

With a new chief executive chosen from well outside its decaying orbit, Yahoo (YHOO) now has one last chance to salvage itself from a slow spiral into irrelevance. On Jan. 13, the struggling Internet icon appointed Carol Bartz, the executive chairman and former CEO of computer design software firm Autodesk (ADSK), to succeed co-founder Jerry Yang at Yahoo’s helm.In her first public statements on behalf of the company, on a brief conference call with analysts, Bartz’s no-nonsense style shone through. She noted that Yahoo is a strong company that “frankly needs a little management” and said she would take some time to talk with her staff before announcing any plans for what Yahoo should do from here on out.

For her part, Bartz will need a little educating. It’s not that most people question her management prowess or her drive to succeed amid huge obstacles. She joined Autodesk as CEO 14 years ago and almost immediately got a diagnosis of breast cancer, returning to work while still in recovery. She also joined a company where she wasn’t exactly embraced by the engineers but managed to expand the product line so Autodesk is now a $1.5 billion enterprise, while cutting costs early in the 2001 downturn to keep the business above water.

What Is Yahoo’s Niche?

Bartz, however, has no Internet or media experience, so she probably won’t change Yahoo’s direction on a dime. She’ll not only have to figure out Yahoo’s operations but also learn where Yahoo fits into a still fast-changing Internet media world. “It will likely take months for her to learn the Internet business and how Yahoo actually works before she can develop an effective new strategy,” Bernstein Research analyst Jeffrey Lindsay said in a note to clients.

Observers have no shortage of ideas for what she should do next. None of this advice, it should be said, is something Bartz has asked for outside the company. Indeed, Bartz put it in no uncertain terms that she wouldn’t be hurried before she had a chance to examine operations more closely. “Let’s give this company some friggin’ breathing room,” she declared in the conference call.

But investors, advertisers, and employees won’t give her unlimited time to decide Yahoo’s next steps. Here are five ideas that smart folks are hoping will get Yahoo back on track once and for all. Not all of them are entirely new, but they’re all more relevant than ever as Yahoo stares down restless investors, weary employees, and a declining economy that is now taking a heavy toll on Internet advertising.

• Focus, focus, focus. For the past year or so, Yang and Yahoo President Sue Decker have repeated the mantra that Yahoo aims to be the first stop online for consumers and advertisers alike. But that amorphous vision has never resonated with many people outside the company. “They need someone to lead a redefinition of where they want to be, where their strengths are,” says Bill Coleman, CEO of software maker Cassatt and a former colleague of Bartz at Sun Microsystems (JAVA).

Management will also need to end debate over whether Yahoo is a tech company or a media company, as many analysts and investors keep wondering. It simply has to be both, just as successful companies such as Google (GOOG) and Amazon.com (AMZN) are. The bigger imperative is to define what makes Yahoo special.

More than anything, Yahoo’s uniqueness lies in its unmatched collection of curated media properties, from Finance to Sports, that have large, loyal, and distinct audiences that advertisers still love. That message has gotten lost in Yahoo’s fitful attempts to be a search engine, a social network, and other flavors of the month. And Yahoo’s leadership needs to focus on more than just message, but also make hard decisions about what not to do anymore—perhaps its international operations, maybe even search. “We expect Yahoo to reduce the number of operations it has” to focus on what it does best, says Scott Kessler, an analyst at Standard & Poor’s, which, like BusinessWeek, is a unit of The McGraw-Hill Cos. (MHP).

• Nuke the current management structure once and for all. Although former CEO Terry Semel was credited with turning Yahoo around in its youth, he helped create a “matrix” management system that required ideas to be vetted by many managers, slowing new services and making few people truly accountable for particular projects. Despite repeated vows to get rid of the matrix and constant reorganizations of management, that hasn’t happened. “They need one person in charge to coordinate what they do,” says Autodesk CEO Carl Bass.

And Bass and others think that’s precisely what Bartz can do. “She has a forceful ability to make decisions, and that’s a talent Yahoo needs,” says Neil Sims, managing director at the executive search firm Boyden Global Executive Search.

• Free the techies. There are still many talented engineers and programmers among Yahoo’s more than 10,000 employees. Many frequently mention being shackled by that pesky management structure, which is true enough. But at the same time, engineers always need focus, and nowhere more than at Yahoo. Too many times they’ve come up with services, such as the Yahoo 360 social network, that look cool but go nowhere because they don’t work as well as simpler services, such as Facebook. At Autodesk, Bartz “got various engineering groups to work together,” says Gartner (IT) analyst Allen Weiner. “She brings adult supervision to Yahoo.”

• Dial up Microsoft CEO Steve Ballmer to talk about a deal. No, not for the whole company. That’s not going to happen because Microsoft no longer wants to do it, and Yahoo will never sell out for anything close to its current stock price. Nor, in some people’s estimation, is selling off the search business a great idea. Yahoo would be unwise to sever search, given the growing, potentially lucrative connections between search advertising and the display variety that are Yahoo’s strength. Rivals Google and Microsoft (MSFT) are busily devising ways to tap those connections better.

A better choice, says S&P’s Kessler, would be to forge a joint venture that combines Yahoo’s and Microsoft’s search businesses into one but gives both a stake in the operation. This is something others, such as Silicon Alley Insider’s Henry Blodget, have been advocating for a long time, too. The advantages: no huge cash outlay, no huge integration issues, and a Yahoo board likely to be much more open to such a deal.

• Nail the next generation of online display advertising. APT, Yahoo’s latest attempt to automate the placement of display ads, is a start, but it hasn’t yet come close to the ease of placing search ads. Because Yahoo is the clear leader in display ads, and advertisers clearly want it to succeed to provide richer venues for their marketing messages, it’s in a unique position to be the leader.

Indeed, the entire advertising industry is desperately looking for what new ad formats will give them a way to do branding as effectively as Google’s ads work for direct-response marketing. No one yet has sure answers. But if anyone can come up with them, it should be Yahoo, whose considerable experience in search, banner, and video ads—combined with unmatched relationships with advertisers and agencies—gives it a golden opportunity. Bartz must figure out how to seize it. One promising avenue: Corral Yahoo’s many social networking efforts into something more coherent that will provide a way for marketers to forge deeper connections with consumers—in other words, steal a march on Facebook.

No doubt the new CEO will have her own ideas. And no doubt investors weary of Yahoo’s struggles will welcome almost anything Bartz does that changes the status quo. “Given the recent stagnation at Yahoo, we think almost any movement from here will be forward,” says UBS Investment Research (UBS) analyst Ben Schachter in a note to investors. But Bartz will have to move quickly to keep Yahoo from falling further behind.

Source: BusinessWeek – By Robert D. Hof

Yahoo Inc’s (YHOO.O) new CEO is a straight-shooting, tough-talking technology veteran but she is seen lacking two qualifications investors hoped for most: deal-making savvy and Web business know-how.

Carol Bartz was appointed to the top job at Yahoo on Tuesday after a two-month search, and brings with her a strong track record of revenue growth at software company Autodesk Inc (ADSK.O), where she was chief executive from 1992 to 2006 and still remains executive chairman.Bartz, however, does not have an established reputation as a deal-maker and Yahoo investors regarded her appointment skeptically, with shares of the Internet search and advertising company dropping more than 3 percent during the trading day.

“People respect her. She is direct and focused, but not mean-spirited like a ‘Chainsaw Al’ type of person,” said Needham & Co analyst Richard Davis, who covered Autodesk when Bartz was at its helm.

She is credited with increasing Autodesk’s revenue from $285 million to $1.5 billion during her 14-year tenure, as well as diversifying its business. Bartz, 60, built the company by buying small and medium-sized businesses, including a $444 million buyout of Discreet Logic in 1999.

“She seems to me to be more of a builder than a buyer-and-flipper,” Davis said. “I’m sure that plenty of people wanted to buy Autodesk over the years.”

Analysts lauded her for being a dextrous, capable and committed executive, but said that without any experience in the Internet sector, she would likely find it daunting to turn around Yahoo, which is a distant second to Google Inc (GOOG.O) in the search advertising market.

Bartz will be under immediate pressure from investors, who have seen the value of their shares nosedive in the past year, to re-open talks with Microsoft Corp (MSFT.O) and secure a sale of the company at a healthy premium. The software maker has shown no interest in reviving its $47.5 billion takeover bid.

Bartz herself welcomed the challenge during her first conference call as Yahoo CEO, saying she wouldn’t have accepted the offer if she didn’t think a turnaround was possible.

“I just see this company as a company with enormous assets that frankly could use a little management, and I love leading, love managing, love making decisions,” she said.

She added that she would address questions of whether Yahoo should look for a search partnership, divest assets and find new ways to cut costs later, after she had spent some time understanding the company.

DEAL OR NO DEAL

Collins Stewart analyst Sandeep Aggrawal said Microsoft could see Bartz’s appointment as an opportunity to make a fresh proposal for Yahoo.

“Yahoo probably needed a CEO who was going to favor this deal,” Aggrawal said. “We were never really sure whether Jerry Yang wanted to do this (Microsoft search) deal or not.”

Yahoo co-founder Jerry Yang agreed to step down from his CEO post in November after drawing investor ire for failing to strike a deal with Microsoft.

Although Bartz was mum on Microsoft on her first day, some analysts wondered if her appointment itself was a message to the market that Yahoo wants a CEO who can focus on the company’s growth strategy rather than sale.

“The selection of Bartz is a declarative statement for Yahoo, that ‘we are not for sale’,” said Neil Sims, a managing director at executive search firm Boyden’s technology practice group. “She doesn’t have the M&A dealmaker profile you’d expect Yahoo to select if (selling) was their overt intention.”

Analysts also wondered whether Bartz’s lack of media industry experience would be a stumbling block when it comes to transforming Yahoo.

“The Yahoo brand is very muddled and complicated and confusing,” said Sims, who has done executive search work for Yahoo. “The company is a cobbled-together association of fiefdoms, and within those business units and predecessor companies are strong personalities with agendas.”

Bartz’s lack of industry insight could make managing the company that much tougher, he added.

But Bartz refuted the notion that it would be tough for her to run Yahoo’s online media properties because most of her experience is in the technology industry.

“I didn’t know CAD (computer-aided design) when I joined Autodesk, I didn’t know hardware when I joined Sun,” she said. “I am a technology person, I am a market-driven person, I love customers. So I suspect I have a little brainpower to learn what it takes to understand media.”

Source: Reuters

NEW YORK – Yahoo Inc chief Jerry Yang signaled a more open stance towards Microsoft Corp on Monday, saying he had been seeking common ground when the software maker abruptly ended deal talks.

Yang told Reuters in an interview that he had “mixed feelings” about the weekend outcome, after investors showed their disappointment over the break-up of negotiations by sending Yahoo shares down 15 percent.

“We were negotiating a way to find common ground and then on Saturday they chose to walk away,” said the 39-year-old co-founder of the pioneering Internet company. “They started it and they walked away.”

Asked if Yahoo would still leave a door open for Microsoft to return, Yang said: “If they have anything new to say, we would be open. … I am more than willing to listen.”

After three months of negotiations, Microsoft CEO Steve Ballmer raised his offer for Yahoo to $33 per share from an initial $31, for a total deal value of about $47.5 billion.

Yang held out for $37 per share, saying that even the sweetened offer did not value Yahoo properly for its Web search advertising technology, its prominence in selling display ads and its lucrative overseas holdings.

But its two largest shareholders independently told The New York Times they would have sold for as little as $34.

“I am extremely angry at Jerry Yang and at the so-called independent board,” Gordon Crawford, portfolio manager for Capital Research Global Investors, the largest Yahoo shareholder with some 16 percent of stock, told the newspaper.

Reuters – Continued…