Rumors of a search deal between Yahoo and Microsoft surfaced once again Wednesday, when Yahoo's Chief Financial Officer Blake Jorgensen said the Sunnyvale company was not opposed to doing a deal with Microsoft if the price was right and Yahoo was able to retain control of its users' data.
Still, no one expects a deal to be announced immediately. Yahoo Chief Executive Carol Bartz, who was hired in January, has yet to assemble her team. She is in the midst of charting a major reorganization, likely to be announced in the next few days, that will create more centralized management for the freewheeling Internet icon.
"These things go in steps," said Jason Helfstein, an analyst at Oppenheimer. In addition to figuring out the future of Yahoo's search business, Helfstein noted, Bartz must find a way to increase the value of display advertising, the banners and graphical boxes that appear on Web pages.
Yahoo has long talked about the value of combining search advertising and display advertising. This week it revealed a new advertising service that determines which display ads to show on a page based on what the person reading that page has searched for recently. Earlier this month, Yahoo also began showing small display ads, including video, alongside search results.
But it's too soon to tell if such initiatives will improve Yahoo's financial performance.IDC, a market research firm, says display advertising could fall as much as 18 percent in the first quarter of this year. However, Karsten Weide, an IDC analyst, said the decline will not be as severe for Yahoo, thanks to its ability to effectively target display ads.
Indeed, Yahoo's performance last quarter shows that the company may have finally found some solid ground. While IDC estimated that display advertising fell 7 percent across the board, Yahoo's display sales were off only 2 percent.
Even more encouraging, Yahoo has stopped losing market share in search. According to comScore, Yahoo delivered 21 percent of U.S. Internet searches in January, vs. 63 percent for Google and 8.5 percent for Microsoft. Compared with the prior month, Yahoo was up half a point, and Google was down half a point.
Meanwhile, Helfstein said he expected a number of resignations as Bartz, who was hired in January, puts her team in place. In recent weeks, former Yahoo president Sue Decker and her head of communications Jill Nash both resigned. Gerald Horkan, a senior vice president handling corporate strategy, also left a few weeks ago. Marco Boerries, who headed Yahoo's mobile initiative, left Sunday, and Neeraj Khemlani, the vice president in charge of Yahoo News, resigned Monday to become special assistant to Hearst Chief Executive Frank A. Bennack Jr.
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