Yahoo Inc. has filed an investor presentation that details the Company’s three-year financial plan and strategic initiatives which are expected to roughly double operating cash flow over the next three years from $1.9 billion to $3.7 billion and generate $8.8 billion in revenue excluding traffic acquisition costs (revenue ex-TAC) in 2010.
The financial plan was first presented to Yahoo!’s board of directors in December 2007, before the Company received the unsolicited acquisition proposal by Microsoft Corporation.
The presentation supports the unanimous determination by the Company’s board of directors that Microsoft’s January 31, 2008 unsolicited acquisition proposal substantially undervalues Yahoo!. The board cited Yahoo!’s global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as its substantial unconsolidated investments, as factors in its decision. Yahoo!’s board of directors is continuing to evaluate all of its strategic alternatives to maximize value for Yahoo! stockholders.
Yahoo!’s management today also reaffirmed its outlook for the first quarter 2008 and full year 2008, as previously provided on January 29, 2008.
Key sources of projected growth in revenue and operating cash flow cited in the presentation include $1.9 billion in added revenue ex-TAC over the next three years from display/video advertising, as Yahoo! expects its growth to outpace the currently anticipated market rate of growth in online display/video advertising. The Company also expects $1.4 billion in added search revenue, implying growth essentially in line with the anticipated market rate of growth in search advertising.
“Yahoo! is positioned for accelerated financial growth – we have a powerful consumer brand, a huge global audience and a highly profitable operating model,” said Jerry Yang, the Company’s co-founder and chief executive officer. “With industry-leading tools, technology, people and platforms, Yahoo! is poised to capture growth in display advertising where we believe growth will be greatest. Combined with our recent progress in search monetization, Yahoo! is well positioned to provide the broadest range of products to our advertisers while delivering the most compelling experiences to users.”
“This is a scale business and our scale is a tremendous strategic asset,” said Roy Bostock, Chairman of the board. “We are pleased to share with the market more details about our business and our expectations for Yahoo!’s financial performance, which provided context for our board’s unanimous rejection of Microsoft’s unsolicited proposal. Yahoo! represents a truly unique strategic platform within our industry. The board of directors and management will continue to work closely together to ensure that any strategic path we pursue capitalizes on that uniqueness and value in a way that maximizes the benefit to our stockholders.”
Yahoo!’s investor presentation also reiterates its principal strategies, which are to enhance an already strong position as a leading starting point for users of the Internet and to be a “must buy” proposition for the most online advertisers.
Starting Points: In support of the Starting Points objective, which focuses on properties that users return to many times a day to start their Internet experience, the presentation discusses Yahoo!’s initiatives to make its front pages, Yahoo.com and My Yahoo!, as well as search, mail and mobile more open, social and relevant to users. The presentation highlights Yahoo!’s leading positions in key starting points, including the 305 million unique monthly users of its homepage and the 262 million unique monthly users of Yahoo! mail.(1)
Must Buy: The presentation also highlights the Company’s Must Buy strategic objective, which focuses on making it easier for advertisers, agencies, publishers and ad networks to do business with Yahoo! and with one another. Key initiatives include the development of a new ad platform designed to simplify online advertising buying and selling as well as improvements to the Panama search advertising platform. In addition to its leading position in display advertising distributed on its owned and operated sites, Yahoo! is also the second largest provider of sponsored search advertising online. Yahoo! also operates Right Media, the leading online advertising exchange, and is now ranked among the largest online advertising networks with premium partners including eBay, Comcast, AT&T and many more.
The presentation notes that, in addition to Yahoo!’s strong projected operating results over the next three years, the Company’s strategic assets in Asia, including its stakes in Yahoo! Japan, Alibaba Group and Gmarket, its strong cash position, and its early leadership positions in mobile Internet and emerging markets, combine to create significant equity value.