NEW YORK (AP) – Shares of Yahoo advanced in premarket trading today, with Wall Street analysts praising the company’s efforts to trim costs amid a severe advertising downturn.
Yahoo said late Tuesday that it would cut its head count by almost 700 positions. The online bellwether also reported a 78 percent drop in first-quarter income.
“Management has moved aggressively to protect margins and realign costs,” Jefferies & Co. analyst Youssef Squali told investors in a note Wednesday. He reiterated a “Buy” rating on shares and raised his price target for the stock to $19 from $18.
Squali added “We are encouraged by the new CEO’s efforts to make Yahoo more fit, which would position it better to compete long-term and also give it more leverage in any negotiations with” Microsoft Corp.
Carol Bartz joined Yahoo as chief executive in January from design software maker Autodesk. She replaced co-founder Jerry Yang, who had drawn investor ire for rejecting a $47.5 billion buyout offer from Microsoft last May.
Yahoo, lagging far behind Web search rival Google in terms of search engine market share, is under pressure from investors to make a deal with Microsoft.
But not everyone thinks an agreement is likely. “We remain skeptical that the two parties can find a middle ground” given that Yahoo would have to undertake the “irrevocable step of getting rid of search,” Thomas Weisel analyst Christa Quarles wrote to clients today.
Quarles, who rates shares “Underweight,” nevertheless said Yahoo’s job cuts mitigate concerns that new investments planned under Bartz could hurt margins this year.