Yesterday, Yahoo released its Q4 earnings (slides here) and, despite prognosticators who were expecting disaster, showed Y/Y net revenue down 2% and up 4% Q/Q. EBITDA was $542MM and cash was up $238mm Q/Q (to $3.5B).
Highlighting the strength of their online media based franchise, measured by page-views, Yahoo continues to lead eleven major categories (such as finance, mail, news, sports, homepage). No doubt that from a micro perspective, there is still gold in those hills.
Turning to a macro view, last night, my smart friend Larry and I saw ex-Treasury Secretary Robert Rubin speak about the economy and policy alternatives (link to Dealbook article here). Mr. Rubin is a brilliant and articulate businessman, turned politician, who opined about the causes and cure for the economic crisis. His sentiment is that for at least the past 4 years (I am not sure if this timing was intended to give distance from the Clinton Administration), systemic risk was being habitually understated and a confluence of low probability factors produced the most extensive market contraction we have seen in 70 years.
At its core, the surge in housing prices, while real wages remained stagnant, produced a pyramid that grew unnaturally. Aided by the failure of the ratings agencies and complacent banking practices a magnification of risk, through the rampant use of derivatives (whose use is not balanced/limited by underlying asset values, created a recipe for disaster. In short, the economic train was accelerating and no one was minding the speed limit (the government), or wearing seat belts (you and I).
He sees us engaged in a global economic crisis that requires Sovereign States to work in a coordinated manner in a world that is hyper-linked. Unfortunately, in his view, the G8, or G20 do not represent an effective body as States are hesitant to surrender elements of their fiscal policy authority, which is required for a unified response.
While supportive of the fiscal stimulus, as the #1 priority for the Obama administration, he is concerned that a long-term effect of the stimulus may lead to massive debt/deficits that will undermine currency and bond markets. Moreover, the moral hazard of industry bail-outs encourages risk taking, as the perception is that the government will always provide a safety-net.
Back to Larry and Yahoo.
Before the Mr. Rubin's speech Larry noted that most of the companies in his portfolio either met or exceeded their Q4 and yearly goals. Ticking down the various markets, management actions, and company objectives, he was wondering whether the industries at the eye of the storm (media and hedge meltdowns/frauds) were possibly generating a more dire perspective than was warranted. Certainly, Yahoo, being one of the most vilified companies in the Internet arena is not in the dire straights one would have expected by reading the articles lampooning Mr Yang as a dunce, or the Company as toast.
It is wonderful to hear a fresh perspective that challenges whether we are seeing Sunshine, or living a Daydream