Yahoo to lay off 1,000 as profit drops

Updated at 3:05 p.m. PST with details from conference call.

Yahoo plans to lay off 1,000 workers in February to help it focus on its search and advertising businesses, executives said Tuesday after the company posted higher fourth-quarter revenue than a year ago but a lower net profit.

The Internet giant, which currently has about 14,300 employees, will see a $20 million to $25 million charge in the first quarter as a result of the layoffs, Chief Financial Officer Blake Jorgensen said. The layoff charge is not included in the company's guidance. The job cuts, which had been expected, will account for 7 percent of the company's workforce. Yahoo did not say which divisions would be affected.

Meanwhile, the company will continue to invest in its core search and ad businesses and will focus on its front door, Yahoo Mail, and mobile, executives said. Display advertising revenue was up 20 percent in the fourth quarter.

"We're making good progress executing on this strategy, and I'm confident we're heading in the right direction," Chief Executive Jerry Yang said in a conference call with analysts. "This sort of transformation takes time, but we have the talent and the strong cash flow to succeed."

Earlier, the company posted fourth-quarter earnings that beat Wall Street expectations, but gave conservative guidance, prompting a 10 percent drop in its share price in after-hours trade.

Yahoo's fourth-quarter revenue, excluding commissions paid to publisher partners for traffic, was $1.4 billion, up 14 percent from $1.2 billion a year ago. Net profit was $206 million, or 15 cents a share, down from $269 million, or 19 cents per share, a year ago.

Analysts polled by Thomson Financial were expecting Yahoo to post fourth-quarter earnings per share of 11 cents on revenue of $1.4 billion.

For the full year, Yahoo posted net income of $660 million, or 47 cents a share, down from $751 million, or 52 cents a share, a year earlier. Revenue for 2007 rose 12 percent to $5.1 billion.

The company's guidance for the first quarter is for revenue in the range of $1.28 billion to $1.38 billion, excluding traffic acquisition costs. Its full-year guidance is revenue between $5.35 billion to $5.95 billion. Analysts are forecasting first-quarter revenue of $1.36 billion and full-year revenue of $5.9 billion.

Yahoo announced that it was renegotiating a multiyear broadband revenue-sharing deal with AT&T that will have Yahoo providing search and display ads for AT&T customers on computers and mobile devices, as well as offering co-branded versions of applications.

The company also named a new chief technology officer--Aristotle "Ari" Balogh, 43. He was formerly the chief technology officer at VeriSign.

Yahoo has been struggling to redefine itself amid increasing competition from social networks like Facebook and the continued dominance of Google in the Web search and online advertising markets. Yahoo has failed to announce a firm strategy since a management shakeout last summer that put co-founder Yang in charge.

Yang has said he wants to focus on making Yahoo the most popular destination for consumers on the Web, but the company is having problems maintaining its lead. For instance, Yahoo is still the top Web property in the U.S., but is now second worldwide, with 485 million monthly visitors compared with Google's 588 million, with according to ComScore.

In search, Yahoo's U.S. share dropped 5 percent in December to 23 percent from a year earlier, while Google's rose from 52 percent to 58 percent, according to ComScore.

Yahoo stock closed at $20.81, down about 10 percent from a year ago.