Investment vultures increase pressure on Yahoo CEO

With buyout vultures circling the Internet company, Yahoo Inc. CEO Carol Bartz may have to accelerate her timetable for engineering a turnaround if she wants to save her job.
Bartz has said it could take a couple more years to revive Yahoo after a long period of listlessness, but it appears the company could become a takeover target if its financial performance doesn't improve within the next few months.
That urgency was underscored late Wednesday as The Wall Street Journal reported that another falling Internet icon, AOL Inc., is in preliminary discussions with a group of leveraged buyout firms, including Silver Lake Partners and Blackstone Group LP, about making a joint bid for Yahoo because its stock has been slumping for so long. The Journal story cited unnamed people familiar with the talks and said two or three other firms could also be interested in the deal, which could bring AOL's charismatic CEO, Tim Armstrong, to Yahoo.
It's likely an opportunistic suitor would emerge if Yahoo's revenue keeps growing at a turtle's pace while rivals such as Google Inc. and Facebook sprint further ahead as advertisers shift more of their spending to the Internet.
Although Yahoo's market value has fallen dramatically in the past few years, buying the company would still be expensive and quite complicated. That's the main reason most analysts believe it would take a while to put together a deal, even if Yahoo disappoints investors yet again next Tuesday when it reports its third-quarter earnings.
With no bid on the immediate horizon, Yahoo shares cooled from the heated reaction to the Journal's initial report. The stock rose 68 cents, or 4.5 percent, to $15.93 on Thursday. It had soared by nearly 13 percent in extended trading Wednesday following the Journal's report.
Yahoo hired Bartz, a tough-talking Silicon Valley veteran, in January 2009, convinced that she would prove the company is worth more than the $47.5 billion that Microsoft Corp. was offering to take over the company, a bid that Yahoo snubbed in May 2008. Microsoft has since forged an Internet search partnership with Yahoo in a joint challenge to Google's dominance of the Web's most lucrative ad market.
Although Bartz has won praise for negotiating the Microsoft alliance and cutting costs to boost Yahoo's profits, the company's revenue through the first half of the year edged up by less than 2 percent. By comparison, Google's rose 23 percent during the same period. That letdown has left Yahoo's stock far below Microsoft's final offer of $33 per share, turning that bid into a millstone.
"Given everything that Yahoo shareholders have been through since then, there is a limited amount of patience left," said Ryan Jacob, portfolio manager of the Jacob Internet Fund, which owns more than 100,000 shares. "It's not necessarily Bartz's fault, but she had to know what she was getting into coming in."
The recent defections of several top Yahoo executives have stirred speculation that Bartz is wearing out her welcome as she approaches the midway point of her four-year contract.
If that's true, it could open the door for Armstrong, 39, who could be seen as a more media-friendly, suave leader than the sometimes-cranky, profanity-spewing Bartz, 62. What's more, Armstrong's Internet background could be seen as a better fit, given that he built up Google's highly prosperous North American advertising business before leaving to become AOL's CEO last year. Bartz is more of a technologist, having previously been CEO of software maker Autodesk Inc. and a top executive at Sun Microsystems Inc.
But Armstrong's reign at AOL so far has largely mirrored Bartz's time at Yahoo. Like his counterpart, Armstrong has spent much of his time weeding out the company's unprofitable operations while focusing on bringing in more unique content in an effort to lure more Web surfers and bring in more advertisers.
Those changes haven't been enough to lift AOL's yet, making it look like a "mini-Yahoo," Jacob said.
AOL's market value is just $2.7 billion, about 13 percent of Yahoo's $21.5 billion. That gap means AOL would need plenty of help to buy Yahoo.
Yahoo declined a request to interview Bartz Thursday. The company, which is based in Sunnyvale, Calif., also declined to comment on the reports of a possible takeover bid. The Journal said Yahoo hasn't been involved in the talks yet.
But the board appears to be taking the talk seriously enough to have hired Goldman Sachs Group Inc. to advise directors on a possible defense, according to Bloomberg News, which also cited unnamed people. Goldman Sachs declined to comment.
AOL and Blackstone also declined to comment Thursday. Silver Lake didn't return calls.
Despite Yahoo's struggles, there are several reasons why the company remains a takeover target.
For starters, Yahoo still boasts one of the world's best-known brands. Its website remains alluring enough to attract an audience of nearly 600 million, although people have been spending less time there as they hang out more frequently at trendier spots such as Facebook.
Yahoo also owns a 39 percent stake in one of China's fastest growing companies, the Alibaba Group. That stake presumably would be sold if leveraged buyout firms were to attempt a takeover to make the bid easier to finance. Analysts have estimated that selling Yahoo's Alibaba holdings and other Asian assets could fetch anywhere from $8 billion to $13 billion, depending on market conditions. That's a large chunk of Yahoo's current market value of $21.5 billion.
Bartz has argued that selling the Alibaba stake right now doesn't make sense because it will likely be worth even more in the years ahead as China's Internet market continues to grow. That's a notion some shareholders support.
If AOL and the buyout firms decide to pursue Yahoo, a successful bid would first hinge on whether the offer was high enough. Analysts seem to believe Yahoo's board would be hard pressed to turn down an offer ranging from $21 to $23 per share after spurning Microsoft two years ago. That would still be 32 percent to 44 percent above Thursday's closing price, though far less than Microsoft's final offer of $33.
Analysts aren't convinced a combination between AOL and Yahoo even makes sense. "I don't believe putting together two weak, stumbling companies would make the sum greater than its parts," Wedge Partners analyst Martin Pyykkonen said.
He believes another possible scenario might make more sense: Microsoft pouncing on Yahoo with another takeover bid at a price far below its offer of 2 1/2 years ago.

Hackers in China steal S.Korean secrets: Seoul

Hackers in China have stolen secrets on South Korea's defence and foreign affairs by using bogus emails claiming to come from Seoul officials and diplomats, the intelligence agency said Friday.
The National Intelligence Service uncovered the hacking early this year and warned government offices about the danger of such emails, a spokesman told AFP.
Hackers sent emails in the names of South Korean diplomats, presidential aides and other people familiar to Seoul officials.
Attached files containing viruses were disguised as important documents, such as analyses on North Korea's economy.
When a recipient clicked on the attachment, the virus started downloading documents in his or her computer, the spokesman said.
Lawmaker Lee Jung-Hyun of the ruling Grand National Party told parliament Thursday that a "considerable volume of classified documents" was feared to have been leaked from the defence ministry and the foreign ministry.
The foreign ministry said it had asked overseas diplomatic missions to be extra alert to such hacking attempts.
The South's intelligence service in June investigated a major "distributed denial of service" cyber attack on the main government website by hackers traced to China.
The security ministry said at the time its cyber security team had been on alert for such attacks as tensions rose with North Korea.
The South's spy chief blamed North Korea for cyber attacks from China-based servers that briefly crippled US and South Korean government and commercial websites in July 2009. US officials were uncertain of the origin.
Seoul military officials say the North has an army unit of elite hackers.

Online job search dos and don'ts

Persistent high levels of unemployment affect everyone, whether you've been jobless for months or are happily and securely employed but worry about the dwindling prospects for out-of-work friends and loved ones. Plenty of Web sites offer to help people find a new or better job. The challenge is distinguishing the legitimate online employment services from the many job scams cluttering the Web.
The preliminaries: Cover letters and resumes
Job-search counselors highlight the importance of well-crafted resumes and cover letters. Jobweb offers plenty of resume advice geared mostly to recent college graduates but applicable for nearly every job seeker. It includes information on video resumes, tips for navigating the online-application process, and dozens of sample resumes, again intended for students but adaptable for more experienced workers.

Google posts strong Q3 financial results

 Google continues to pile up the money, beating analyst estimates today for revenue and earnings for its third quarter.

Third-quarter revenue, excluding the traffic acquisition costs Google pays to its partners, was $5.48 billion, exceeding estimates from analysts polled by Yahoo Finance of $5.25 billion for the quarter. Overall revenue of $7.29 billion increased by 23 percent, compared to last year's third quarter, on the back of a 16 percent jump in paid clicks across Google's network of Web sites.
"We're very pleased with our Q3 results, and it's clear that the digital economy continues to grow rapidly," Google's Patrick Pichette, chief financial officer, said on a conference call following Google's announcement.
Net income was $2.17 billion, a 32 percent increase compared to net income of $1.64 billion a year ago. Earnings per share, excluding the effects of certain one-time costs and stock option compensation costs, were $7.64, as compared to analyst estimates of $6.67.
Revenue from both Google-owned sites, powered by AdWords ads, and Google network sites, powered by AdSense ads, grew 22 percent, compared to the prior year. Google's own sites account for 67 percent of its revenue, while partner sites chip in 30 percent of the overall total.
Google provided a few details that it has kept under wraps until this point, when it comes to metrics that don't involve search ads. Jonathan Rosenberg, senior vice president for product managers, told financial analysts on the earnings call that Google has reached three milestones: it's on pace to gain $2.5 billion a year in revenue from display ads and $1 billion a year in revenue from mobile devices, and it's monetizing 2 billion views of YouTube videos a week.
Display ads have long been a target for Google, which is trying to get the companies and agencies that spend billions of dollars on its text search ads to use Google as their display ad broker as well. In addition, YouTube's financial contribution has been long in the making. Google still refused to say whether YouTube is profitable, which would seem to imply that it's not, but Google CEO Eric Schmidt has previously said the company expects YouTube to become profitable this year.
Rosenberg also disclosed that Google Instant, launched in September, has made a very minimal contribution to Google's revenue and is more expensive to run than the regular old search results process. He was hoping to counter arguments that Google launched Google Instant simply to generate more searches--and therefore more clicks on ads--saying flat-out, "we didn't launch Instant to make more money."
Cash is king at Google: it now has $33.4 billion on hand in cash, cash equivalents, and marketable securities. The company hired about 1,500 new employees during the quarter, raising its total head count to 23,331 at the end of the quarter, or the three-month period ending September 30.
Pichette spent a great deal of his prepared remarks reminding the financial community that Google still thinks of itself as a growth company, at a time when many in Silicon Valley are looking at places like Facebook and Twitter as the next big sources of growth on the Internet. "We are on this growth agenda at full throttle," he said, noting that Google was "continuing to explore" how it could hire the right people it needs, and retain the good ones it already has, amid "a war for talent" in the Valley.

Teens crazy for texting, but losing interest in voice calls

Turns out the average teen exchanges more than six text messages an hour—every hour—during waking hours, according to a new survey. At the same time, the average number of minutes that teens spend talking on their phones is on the decline. Why? Because texting is faster and easier than making a voice call, teens said.
The Nielsen Co. survey of more than 60,000 wireless subscribers confirmed what you probably already knew: When it comes to texting, no one beats teens.
What's surprising about the Nielsen study, however, is the margin of victory. While the average U.S. teen (defined by Nielsen as someone between the ages of 13 and 17) sends and receives a whopping 3,229 text messages a month—more than 100 a day—young adults 18 to 24 managed a measly 1,630 monthly text messages.
As for everyone else, well ... as you can see in the chart below, the numbers trail off from there.

Student in Jobs spat sours on Apple, not journalism

Chelsea Kate Isaacs hasn't graduated from college yet. But she's already learned one of the tough lessons of tech journalism: some companies are easier to deal with than others.
Isaacs, a 22-year-old journalism major at Long Island University, came to prominence several weeks ago after a well-publicized e-mail spat with Apple CEO Steve Jobs as she tried to complete a class assignment.
Isaacs turned to Jobs after failing to get answers from Apple's PR department. The e-mails got increasingly terse, ending with Jobs telling Isaacs: "Please leave us alone," according to the e-mail thread posted on Gawker.
This week she had a different sort of experience, turning up at a Microsoft event, of all places.
Isaacs just happened to be among eight students who won a contest run by Microsoft to win a trip to cover the launch of Windows Phone 7. Microsoft picked up the travel expenses, but Isaacs said the group's adviser told them to be tough and hold Microsoft's feet to the fire while meeting with various company executives and learning about the company's products.
As for how she got her chance to cover the Microsoft event, Isaacs applied and submitted a 140-character statement about why she should be one of the students picked. A Microsoft representative said the company was aware of her exchange with Apple, but maintains it played no part in her selection.
Despite two radically different experiences, Isaacs said she has no plans to cover either company any differently.
"It's been a really great challenge and exercise for me to just stay totally in the middle and not be totally biased toward Microsoft because I hate Apple, but I don't hate Apple," she said "I just had one bad experience...It's one person at the company and I still appreciate their products and am still going to look at things objectively."
If anything, Isaacs said the experiences have made her more interested in technology.
"I have always loved technology, but I'm not a tech-obsessed person," she said. "I appreciate it and I use it every day. I've never been the kind of person who is the first (in) line for the new device...But after all this I'm getting much more into technology."
What Apple has lost, though, is a potential customer.
"I have very strict values," she said. "I really felt that was unethical and I wouldn't be comfortable giving a dime. If that's the way you treat consumers, that's not right."
Isaacs said the event did make her more interested in phones, including Windows Phone.
"I think it looks way cooler than Android, honestly," she said. "It just looks much more personal and it has something new to offer. iPhone and Android are very much alike."
So, what phone does she carry?
"I have a BlackBerry, which a lot of tech people say is like, prehistoric, at this point," Isaacs said.

A fifth of U.S. adults have engaged in video chats

Nearly 20 percent of all American adults have participated in a video call either online or on their mobile phone, according to a study released today by the Pew Research Center's Internet & American Life Project.
The study, which surveyed 3,001 people over the summer, found that 74 percent of American adults use the Internet. And out of that group, 23 percent of folks have tried video calls, chats, or teleconferences over the Web. Approximately 85 percent of adults use a mobile phone, Pew said, and out of that group, 7 percent of respondents said that they have chatted over video on their handsets. That comes out to about 19 percent of adults having placed at least one video call.
Although Pew didn't provide specifics, it indicated that many of the people it surveyed said that they have used both mobile phones and the Web for video chats. In the study it was the first time that the Pew Research Center's Internet & American Life Project asked about the use of video calling online and via cell phones.
Pew's findings follow another study released recently by Juniper Research, which estimated that 29 million adults worldwide will be using a smartphone to video chat by 2015. The research firm said that widespread video-calling adoption in the mobile space could be "held back by a lack of interoperability between different devices."