GAAP revenue was $1,324 million for the fourth quarter of 2011, a 13 percent decrease from the fourth quarter of 2010.

Revenue ex-TAC was $4,381 million for the full year ended December 31, 2011, a 5 percent decrease from the same period of 2010. The year over year decrease was primarily due to the revenue share related to the Search Agreement with Microsoft. Income from operations increased 4 percent to $800 million for the full year ended December 31, 2011, compared to $773 million for the same period of 2010.

GAAP revenue was $4,984 million for the full year ended December 31, 2011, a 21 percent decrease from the same period of 2010, primarily due to the required change in revenue presentation related to the Search Agreement and the associated revenue share with Microsoft.

Net earnings per diluted share was $0.24 in both the fourth quarter of 2011 and the fourth quarter of 2010.

Business Highlights

Yahoo! is home to 11 number one properties globally and ranks in the top three in 20 categories worldwide. (comScore, December 2011)

Yahoo! continued to modernize its technology platforms, with additional sites across the Americas, EMEA and Asia Pacific going live on the new global Yahoo! Publishing Platform, bringing the total more than 130.

Yahoo! acquired interclick, inc., which has built an industry-leading data valuation platform optimized to work with large data volumes across multiple providers and marketplaces.

Yahoo!, AOL and Microsoft announced agreements to allow ad networks operated by the three companies to offer each other’s premium nonreserved online display inventory to their respective advertising customers.

Yahoo! launched its 2012 U.S. presidential election programming, beginning with exclusive ABC News and Yahoo! News “Newsmaker” interviews with Republican candidates.

Yahoo! launched Livestand, a personalized living magazine for iPad. Livestand weaves together content from leading third-party publishers and Yahoo!’s global media network to create a visually stunning and deeply personalized digital experience tailored to its users’ interests and passions.

Yahoo! introduced additional products for the iPad such as Yahoo! Mail and IntoNow, an app that makes watching TV more engaging, social and fun.

Yahoo!, in conjunction with Playtone and Reliance Entertainment, will be the exclusive online broadcast partner for Tom Hanks’ multi-dimensional animated series “Electric City”.
Search Alliance Impact

Yahoo!’s results for the fourth quarter of 2011 reflect $48 million in search operating cost reimbursements from Microsoft under the Search Agreement, which amount is equal to the search operating costs incurred by Yahoo! in the fourth quarter. Search operating cost reimbursements are expected to decline as Yahoo! fully transitions all markets to Microsoft’s search platform and, in the long term, the underlying expenses are not expected to be incurred under Yahoo!’s cost structure. Our business outlook for total expenses reflects these anticipated savings.

As previously reported, Microsoft has agreed to extend the RPS Guarantee in the U.S. and Canada through March 2013.

Fourth Quarter 2011 Revenue Highlights

Display revenue ex-TAC was $546 million, a 4 percent decrease compared to $567 million for the fourth quarter of 2010.

GAAP display revenue was $612 million, a 4 percent decrease compared to $635 million for the fourth quarter of 2010.

Search revenue ex-TAC was $376 million, a 3 percent decrease compared to $388 million for the fourth quarter of 2010.

GAAP search revenue was $465 million, a 27 percent decrease compared to $640 million for the fourth quarter of 2010.

Cash Flow and Cash Balance

Cash flow from operating activities for the fourth quarter of 2011 was $431 million, a 7 percent increase compared to $403 million for the same period of 2010.

Free cash flow was $327 million for the fourth quarter of 2011, a 111 percent increase compared to $155 million for the same period of 2010.
Cash, cash equivalents, and investments in marketable debt securities were $2,530 million at December 31, 2011 compared to $3,629 million at December 31, 2010, a decrease of $1,099 million. During the fourth quarter of 2011, Yahoo! repurchased 27 million shares for $416 million. During the year ended December 31, 2011, Yahoo! repurchased 110 million shares for $1,619 million.

Business Outlook

Revenue ex-TAC for the first quarter of 2012 is expected to be in the range of $1,025 million to $1,105 million. Based on the terms of the Search Agreement with Microsoft, Microsoft retains a revenue share of 12 percent of the net (after TAC) search revenue generated on Yahoo! Properties and Affiliate sites in transitioned markets. Yahoo! reports the net revenue it receives under the Search Agreement as revenue and no longer presents the associated TAC within cost of revenue. Accordingly, for transitioned markets Yahoo! reports GAAP revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. For markets that have not yet transitioned, revenue continues to be recorded on a gross basis, and TAC is recorded in cost of revenue. GAAP revenue for the first quarter of 2012 is expected to be in the range of $1,170 million to $1,260 million. Total expenses (cost of revenue plus total operating expenses) for the first quarter of 2012 is expected to be in the range of $1,065 million to $1,105 million. Total expenses less TAC for the first quarter of 2012 is expected to be in the range of $920 million to $950 million. Income from operations for the first quarter of 2012 is expected to be in the range of $105 million to $155 million.