• by Mark Walsh  @markfwal, April 21, 2009

In its first quarter under CEO Carol Bartz, Yahoo met earnings expectations on revenues that came in slightly lower than forecast. The company also announced plans to shed 5% of its staff, or about 700 people, based on the 13,600 employees it had as of December. The new round of layoffs follows about 1,500 at the end of 2008.

Yahoo reported a profit of 8 cents a share, down 78% from a year ago, on revenue of $1.16 billion -- a 13% drop from the year-earlier period and falling just below analysts' consensus estimate of $1.2 billion.

During a conference call Tuesday, Bartz and outgoing Yahoo CFO Blake Jorgensen acknowledged the impact of the economic downturn on marketers' display and search advertising budgets. Reflecting the pullback, display ad revenue on Yahoo's own sites fell 13% during the quarter, and search by 3%. Analysts had expected display ad revenue to fall by 17%, and search by 1%.

While emphasizing the importance of search advertising for Yahoo, Bartz declined to comment on the company's reported renewed talks with Microsoft about a search and advertising partnership. Earlier Tuesday, the blog D: All Things Digital reported that ongoing talks were "hot and heavy," citing an unnamed source close to the situation.

"Search is a very valuable business for Yahoo, but that's all I'm going to say about search today," said Bartz. Yahoo's search market share is about 20% and Microsoft's is about 8%. In a sign of how far-reaching the recession has become, search leader Google -- with about two-thirds share -- reported its first quarter-to-quarter sales drop last week.

Despite the economic challenges, Bartz assured that the company is focused on "creating kick-ass experiences for users." She outlined three key goals for Yahoo: globalizing its platform to innovate more quickly, building 'wow' products on top of that platform and continuing to invest in advertising products.

"I can't overestimate the past focus that the company had on the U.S. market which really left international properties to almost fend for themselves," said Bartz. So standardizing the look and feel of its key properties across the world is a key initial focus of investments that Yahoo plans to make in 2009.

To that end, she highlighted management restructuring already begun since she joined Yahoo in mid-January including naming Ari Balogh as chief technology officer, overseeing all product development, and bringing on a chief marketing officer.

She also announced that Jeff Russakow will join the company from Symantec April 24 in the newly created role of senior vice president of customer advocacy, overseeing all customer support services.

As far as the layoffs, the company plans to make the staff cuts in the next two weeks. Bartz characterized the latest reductions as streamlining existing operations rather than the across-the-board, cost-driven cutbacks in December. In short, only about half as many people will be cut this time. The blog D: All Things Digital reported last week that 500 or more layoffs would be announced.

Yahoo cited the hit to revenue especially in its key display ad business, falling 13% to $371 million in the quarter. (Search was actually higher at $399 million.) "We have seen pressure on guaranteed (premium) advertising prices," said Jorgensen, whom Yahoo is still searching to replace after he announced his resignation earlier this year.

Both he and Bartz said they expect brand advertising to rebound when the company does. One of Yahoo's long-term initiatives for boosting display advertising is its APT platform for streamlining the process of buying and selling image-based ads.

Asked about the status of the project, Bartz said development will be ongoing with periodic releases. "It's a big honking important platform for us," she said. "It replaces both the internal ad-serving platform and Right Media outside ad platform. "It was a bigger task than the company understood, frankly."

Yahoo was trading up almost 4% in after-hours trading to almost $15 a share, after closing at $14.38 Tuesday.