According to Yahoo!, it is the leader in display advertising which is a bigger market then search advertising expected to reach to $42 billion by the year 2010. Yahoo also projects to double it’s cash flow and significantly increase revenue over the next three years.
Yahoo’s gross profit for the period ending Dec-31-2007 is up almost $1 billion from the period ending Dec-31-2005. However yearly income which can be applied to common shares has dropped from $1.896 billion in 2005 to $660M in 2007.
From Yahoo’s perspective, its spending more on research & development and has higher administrative costs.
A possible interpretation could mean that Yahoo! is stable and expects higher profits in the near future from what it has invested into research and development in the previous years.
One of the hurdles Yahoo! needs to overcome is to convince this to stockholders which may be looking forward to cashing in on the unexpected opportunity Microsoft is trying to provide to them.
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