Yahoo! Silent On Microsoft

The Internet portal didn't shed light on a possible deal with the software giant as it reported a loss and more job cuts.

BURLINGAME, Calif. -- Beleaguered Internet portal Yahoo! reported first-quarter earnings of $118 million, or 8 cents per share, a decrease of 78% from the year-ago period.

In an effort to cut costs further, the portal expects to lay off 600 to 700 people, 5% of global employees, in the next two weeks.

On a conference call with analysts, Yahoo! ( YHOO - news - people ) CEO Carol Bartz said the company would invest in businesses "that generate the majority of our traffic" and discontinue less-popular offerings, rather than simply making across-the-board staff cuts. Candidates for more investment include the Yahoo! home page and functions like e-mail and Web search, she said, as well as mobile-phone programming and specific Web-content areas like news, sports and entertainment.

Bartz said that "brand advertising is not going to go away," and Yahoo! wants to position itself to take advantage of the economic recovery when it eventually arrives. The recession has walloped most companies' ad budgets, which has hurt Yahoo!'s bottom line.

The company generated revenues of $1.58 million, a decrease of 13% from the first quarter of 2008. Without currency losses, revenue would have declined 8%. Marketing revenues declined to $872 million from $966 million, and were driven by a 3% decline in search-advertising revenue.

Revenues based on fees from online services, partnerships and music downloads decreased 20%. Net income per share was in line with Wall Street estimates, compared with 37 cents in the first quarter of 2008. Earnings in the year-ago quarter, however, were bolstered by a one-time, $401 million gain.

On the conference call, Bartz didn't shed light on whether she is actively pursuing a Web-search deal with Microsoft ( MSFT - news - people ), an alliance many analysts think would benefit both companies. She reiterated, however, that search is "absolutely critical to Yahoo! It's critical to our customers and partners."