Category: News

Ever had the urge to go out to dinner at a restaurant but couldn’t find anyone to dine with? Social dining startup Grubwithus might just have an app for you. Over the weekend it launched GrubTonight, an iPhone app that allows strangers in the same city to meet up for impromptu meals with just a few hours notice. Think of it as a tweetup with a set menu.

If you’re not familiar, Grubwithus is Los Angeles-based startup that specializes in organizing group meals for people with similar interests. Users sign up for a Grubwithus account, and then start signing up for dinners, organized weeks in advance around themes such as the love of sushi or a fascination with Ron Paul. Grubwithus pre-arranges set meals with partner restaurants, and diners prepay their bills before attending. Once there everyone only needs to cover their drink tabs.

GrubTonight works in a similar way, though much accelerated. The iPhone-only app — Grubwithus probably isn’t hosting any Android-lover meals just yet — alerts members to dinners being held that night along with their menus and locations. Unlike the regular Grubwithus dinners, there’s no theme, just social interaction. Diners again prepay and they receive a confirmation an hour before the meal is held. At launch, GrubTonight is only offering up meals in the LA area, but the company said it would expand to more cities in the coming months.

Grubwithus said that the app is focused on immediacy, making it ideal for business travelers, tourists looking to meet each other or the locals or as a means for the newly relocated to meet the community. If a group of diners hit it off they can meet for future meals using the social tools in the larger Grubwithus network.

Grubwithus is one of many startups exploring the idea of a “real-life” social network built around the communal table, but it’s developed more momentum than most. A Y Combinator alum, Grubwithus raised $1.6 million in seed funding from Ashton Kutcher, Andreessen Horowitz, First Round Capital, Aviv Nevo, and other angel investors.

Last year, it announced a $5 million Series A round led by LA VC GRP Partners. In February it used some of those funds to buy up Canadian “supper club” startup The Social Feed, allowing it to expand internationally. In addition to LA, Grubwithus is now organizing meals in Chicago, New York, San Francisco and San Jose, Toronto and Washington, D.C.

Photo courtesy of Shutterstock user corepics

VMware’s future is all about hybrid cloud, software-defined data center and end-user computing, and not so much about other things in its portfolio which will be “de-emphasized” this coming year, VMware CEO Pat Gelsinger told analysts on the company’s fourth quarter earnings call Monday night.

“I’ve learned the importance of prioritization and execution,”  said Gelsinger, an Intel and EMC veteran executive who came aboard as VMware CEO five months ago. ”We will focus first on a portfolio rationalization around the products our customers care most about. Our decision to  commit our cloud application efforts to Pivotal is an example. And we will realign resources as we scale back in some areas,” he said.

The Pivotal Initiative, a spin off of VMware and EMC that will provide cloud and big data applications will draw on VMware’s Cloud Foundry platform as a service, vFabric Java framework, and Cetas big data resources as well as Greenplum analytics and Pivotal Labs agile development expertise from EMC.

Key to VMware: Focus, focus, focus

Gelsinger did not name areas that will be subject to cutbacks, but CFO Jonathan Chadwick said Sliderocket will be sidelined. VMware bought  SlideRocket and its slide presentation software in 2011. It was seen as a complement to the Zimbra productivity software purchased earlier from Yahoo. Depending on how VMware defines end user computing — my guess is it means desktop virtualization rather than desktop apps — I’d expect more cuts in this area.

The company will also cut 900 jobs. “VMware added 6,700 people over three years and we’ll continue to grow, invest and hire in support of our focus areas,” Gelsinger said. “We expect to close fiscal 2013 up 1,000 people.”

There was no information given about the Pivotal Initiative spin out but Gelsinger promised more discussion of that will come at a March 13 at VMware EMC Strategy Summit in New York.

As for earnings, for its fourth quarter, VMware logged a profit of $206 million, or 47 cents per share, up from $200 million, or 46 cents per share, for the year-ago period.  Revenue grew 22 percent year-over-year to $1.29 billion with adjusted net income at 81 cents a share, beating estimates of 78 cents  per share on revenue of $1.28 billion.

More to the point though was low guidance for the upcoming quarter. VMware expects first quarter revenue to come in between $1.17 billion to $1.19 billion, short of  consensus estimates of $1.25 billion and that spooked investors who drove the price down in extended hours trading.

Moving on from server virtualization

VMware is at a crossroads. It continues to lead the market in server virtualization but faces increasing competition there from Microsoft Hyper-V, and open-source Xen and KVM alternatives there. So it’s changing the conversation to network virtualization which is a key underpinning of the aforementioned software-defined data center. VMware is counting on its $1.26 billion buyout of Nicira to give it a leg up in that network virtualization quest.

Apple today released iOS 6.1, which is available via over-the-air download. The update extends 4G LTE support to 36 additional carriers, bringing the total to 70. High-speed data is also available to 23 more carriers for iPad. Apple already supports LTE in Australia, Canada, Japan, South Korea, United Kingdom and United States, among others. New coverage extends to Denmark, Finland, Italy, Philippines, Switzerland and some Middle Eastern countries, to name a few.

“If you look at the total of all of these and the incremental subscribers that are in those countries, that’s over 300 million”, Apple CEO Tim Cook boasts. Availability and adoption aren’t the same thing. IHS iSuppli sees global LTE subscribers reaching 198.1 million this year, up from 92.3 million — that’s 115 percent — in 2012. The analyst firm forecasts 139 percent compound annual growth rate through 2016, with 1 billion expected subscribers.

In that respect, LTE is more an investment in the future. By contrast, with Nexus 4 smartphone and Nexus 7 tablet, Google chose HSPA+, which is more broadly deployed, allowing the release of lower-cost devices. For example, the Nexus 7 with cellular radio sells for $299, compared to $459 for iPad mini, with half the storage; comparable, price is $559. Nexus 4 with 16GB storage sells for $349 from Google, unlocked. The comparable, unlocked iPhone is $649.

Apple claims 500 million cumulative iOS device sales through end of 2012. There are “nearly 300 million iPhone, iPad and iPod touch devices on iOS 6 in just five months”, Phil Schiller, Apple’s senior senior veep of global marketing, says. That’s 60 percent on the newest version — likely more considering not all devices sold are still being used.

By stark contrast, only 10.2 percent of Android users are on newest version Jelly Bean. Apple’s advantage is controlling OS updates rather than letting either carriers or manufacturers do so.

Since I don’t own any iOS devices, there is nothing to say about using the software. So, please, give us your report.

Photo Credit: Joe Wilcox

Al Gore: Averting the climate crisisAl Gore posits an intriguing question in his newest book, on shelves tomorrow, January 29: can we change the future? But this book isn’t about peering into a crystal ball.  In The Future: Six Drivers of Global Change, Gore — who’s spoken at TED multiple times — breaks down the factors that are changing our world at an unprecedented pace, leaving many of us feeling something akin to temporal whiplash. As Gore outlines, these forces are: ever-increasing economic globalization, the development of a “global mind” via instant communication, a global balance of power with multiple centers, an economic compass pointing toward unsustainable growth, revolutions in the field of genomics and biotech,Al Gore: New thinking on the climate crisis and a disruption of the relationship between people and the earth’s ecosystems.

“What do you think about when you hear the phrase ‘the future?’ Is it a hopeful place? Is it a little scary? Does it seem like things are speeding up more than in the past?” Gore asks in a trailer for the book, above. “Well, they are. There are large forces that are shaping and reordering the world we’ve always known.”

But he promises that the tome isn’t all doom and gloom.Al Gore warns on latest climate trends

“No matter where in the world we live, we face a choice—either to be swept along by the powerful currents of technological change and economic determinism into a future that may threaten our deepest values. Or shape the future in ways that protect human dignity and reflect the aspirations of people and nations throughout the world,” he says. “Mapping the future is a risky undertaking. Perhaps the only thing riskier is doing nothing.”

The company that coined the term AirCard will make AirCards no more. Sierra Wireless is selling its 3G/4G modem business to NetGear, which take over the manufacture of its line of mobile hotspots, wireless dongles and data cards.

NetGear will pay $138 million in cash and assume $6.5 million in liabilities as part of the transaction, which will allow the popular Wi-Fi router maker to expand beyond wired and Wi-Fi networking into the cellular market.

External modems were once Sierra’s bread and butter, but over the last five years it began to focus much more an embedded radio modules and the machine-to-machine market, making a few key acquisitions along the way. Meanwhile cellular modems are becoming more of a commodity business.

Sierra has probably seen the writing on the wall. As more smartphones and tablets come with their own hotspot capabilities there will be less need for stand-alone modems, so it’s a market it seems ready to concede to Novatel, Option and networking gear makers like NetGear.

Meanwhile, as the internet of things take shapes more and more devices will start sporting cellular radio connectivity – not just laptops and tablets but also home appliances, cars and even wearable electronics. It’s in those devices Sierra wants to embed its connectivity.

As NBA world champions, the Miami Heat are used to receiving honors and acclaim, but during a reception today with President Obama, the team's standout forward — and reigning league MVP — LeBron James made it clear that this celebration was unlike any other. "We're in the White House right now," he said. "This is like, hey, mama, I made it."

The team was invited to commemorate their award-winning 2012 season, but in his remarks, President Obama thanked the group for spending time with some wounded warriors at Walter Reed, and paid tribute to the important role team leaders including James, Chris Bosh and captain Dwayne Wade, also play off the court:

One of the things I’m proudest of is that they take their roles as fathers seriously.  And for all the young men out there who are looking up to them all the time, for them to see somebody who cares about their kids and is there for them day in and day out, that's a good message to send.  It’s a positive message to send, and we’re very proud of them for that. 

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Twitter and the Cambridge-based startup Crashlytics have announced that they’re joining forces, bringing the team that has helped other startups test their mobile versions for potential bugs and crashes into the fold at Twitter.

Crashlytics wrote on the company blog Monday about their plans for mobile app development in tandem with Twitter:

We built Crashlytics to deliver the world’s most powerful and lightest-weight crash reporting solution. With us, developers gain instant visibility into the precise line of code that caused a crash, enabling them to more easily fix issues. Since our iOS launch, we’ve had the privilege of working with thousands of incredible app developers, from those building independent passion-projects to many of the top iOS apps available today – Twitter, Vine, Yelp, Kayak, TaskRabbit, and Waze, to name just a few.

Going forward, we’re thrilled to work with the incredible team at Twitter. We share a passion for innovating on mobile and building world-class applications. Joining forces will accelerate our build-out, allowing us to leverage Twitter’s infrastructure to deliver new features faster than ever.

The Crashlytics team hails from Cambridge, and the Boston Globe profiled the company in April 2012, where the founders discussed their motivation for starting the company to help other startups understand what was causing crashes on mobile. Presumably Crashlytics will be working on Twitter’s mobile app to improve performance, which is crucial as Twitter tries to improve reliability and scales out the company going forward.

In a perfect world, everybody who uses Internet Explorer would be on the latest version so all the problems affecting IE8 wouldn’t be happening. Unfortunately, or fortunately depending on who you ask, IE10 is only available on Windows 8. That means Microsoft’s latest browser isn’t doing super well in its second month on the market since Windows 8 isn’t doing that well either.

Despite having sold 60 million Windows 8 licenses since launching at the end of October, the latest browser marketshare numbers from Net Applications shows that Internet Explorer 10 hasn’t even cracked one percent yet. Being exclusive to Windows 8 isn’t doing the browser any favors. There’s a beta for IE10 on Windows 7, but it has received little to no publicity from Microsoft. It probably didn’t add much to these numbers.

That being said, Internet Explorer is still king. Overall, the browser still has a majority of the browser marketshare at 54.77 percent. When broken down, the constantly hacked Internet Explorer 8 is used the most with 23 percent of the marketshare and the much safer Internet Explorer 9 coming in 21 percent.

As for the other browsers, Firefox and Chrome are still battling it out for second place. Firefox was in the lead in December with 19.82 percent of the market while Chrome lagged closely behind with 18.04 percent. Safari and Opera came in at 5.24 percent and 1.71 percent respectively.

In mobile browsers, Apple Safari for iOS is still by and large the dominant force with 60.56 percent of the marketshare. The generic Android browser and Opera Mini are the only other mobile browsers with percentages in the double digits with 22.10 percent and 10.71 percent respectively. Chrome is picking up pace, however, as it has increased from 0 percent to 1.48 percent in only a year. Not bad for a relative newcomer to the mobile browser scene.

Though Tina Fey is, perhaps, most well-known for hosting the Weekend Update segment of Saturday Night Live and playing Liz Lemon on 30 Rock, one turning point in her career can be traced to the movie Mean Girls.

Mean Girls was written by Fey, and even starred the comedian herself as a disrespected high school math teacher. Though the movie was marketed as a teen comedy about backstabbing popular girls, the smart humor in the flick managed to make it a cult-classic and a hit with critics. Mean Girls was also one of the last movies to feature a pre-meltdown Lindsay Lohan, and is Amanda Seyfried’s first movie.

Now, it appears that even more Mean Girls could be on the way.

In an interview with E! on the red carpet at the Screen Actors Guild (SAG) Awards, Fey revealed that the rumored Mean Girls musical is actually in the works.

“I would love to,” said Fey when asked about the project. “I’m trying to develop it, actually, with my husband, who does all the music for 30 Rock and I think Paramount’s on-board.”

Google is moving forward with Chrome, both the web browser and the operating system, quickly and seems to be gaining traction. Sure, the browser is popular, but the OS struggled early on, but new notebooks, err…Chromebooks, have been getting a lot of attention, including TV ads in the United States.

However, the search giant has learned that security is pretty important to the end-user, and probably more so to those looking at these computers, because buyers probably tend to be more on the “techie” side. That is why Google has annually invited people to “hack” Chrome in an effort to find and fix flaws.

Today the Mountain View, Calf.-based company announced this year’s “hackathon”, titled “Pwnium 3”. Hackers and security researchers are invited to attend the CanSecWest conference and take their best shots.

Chris Evans of the Google security team announces today that the “attack must be demonstrated against a base (WiFi) model of the Samsung Series 5 550 Chromebook, running the latest stable version of Chrome OS. Any installed software (including the kernel and drivers, etc.) may be used to attempt the attack”.

So, why would you be inclined to try this, aside from the obvious bragging rights? There are some pretty good reasons, and they involve financial gain for the successful “hack”. Evans outlines those details as well.

• $110,000: browser or system level compromise in guest mode or as a logged-in user, delivered via a web page.
• $150,000: compromise with device persistence — guest to guest with interim reboot, delivered via a web page.

That should be more than enough incentive to pack up your bags and fly to Vancouver, British Columbia. CanSecWest will take place March 6-8 of this year.

Photo Credit: Joe Wilcox

Ndamukong Suh, the famous (or infamous, if you prefer) defensive tackle for the Detroit Lions reportedly saved comedian Louie Anderson from drowning (along with help from famed diver Greg Louganis). You couldn’t make this up.

Suh is to appear on Splash, a reality show about diving, a move even his teammates have reportedly spoken out against. I guess it’s a good thing for Anderson he was there. TMZ reports:

Sources close to the production tell TMZ, Louie — who’s a contestant on the show — was practicing his dives on Wednesday when he became a little too bushed to pull himself up the ladder … falling back into the water again and again.

We’re told Louie eventually had to be rescued by Suh and divemaster Greg Louganis — who physically lifted the foundering funnyman to the poolside. Louie then sat coughing up water for several seconds.

So, there’s at least one more person that probably doesn’t have a problem with Suh, despite his bad reputation as a dirty player.

The episode on which Suh will appear will air on Tuesday, March 19 at 8:00 PM on ABC.

Suh recorded two tackles in the Pro Bowl on Sunday.

Image: Ndamukong Suh (img.ly)

The year was 1999 when Research In Motion first unveiled its initial BlackBerry email pager, the beginning of a strong product brand that continues to this day. In that time, the ubiquitous BlackBerry has grown beyond a simple email machine to capable smartphones in 2003, gathering a cult-like following of “crackberry” users.

Given that success, it once seemed unfathomable that RIM wouldn’t easily be one of the world’s top 5 smartphone makers, yet in 2012 it barely held on to the fifth spot as Samsung, Apple, Nokia and HTC sold more smartphones. Put in perspective: RIM’s 32.5 million smartphones sold all year were easily trumped by Apple 47.8 million handsets sold in the final quarter of 2012 alone.

As quickly as RIM’s BlackBerry rose to the top in the first half of the last decade, it just as quickly fell behind the touchscreen smartphone revolution started by Apple in 2007. Now, after several years of losing market share and stalling growth of its BlackBerry subscriber base, RIM is rebooting the product line this week with the debut of BlackBerry 10.

Not the first time for a comeback effort

This isn’t the first of RIM’s attempts to compete with the current crop of smartphones. 2008 saw RIM debut the BlackBerry Storm, an all touch device that created little more than a drizzle in the market. In 2010, the company launched the BlackBerry Torch 9800 along with the BlackBerry 6 operating system and a WebKit browser. But after using an evaluation device, I felt — as did others, based on meager sales — the Torch was an evolution of the same old BlackBerry experience, not the revolution that RIM really needed at the time.

Aware that it needed something new for the future, that same year saw RIM purchase QNX Software Solutions from Harman International. At the time, QNX was used for many in-car information and entertainment systems. RIM’s BlackBerry PlayBook tablet was the first RIM product to use a QNX-based platform and while it was good at what it did, the slate was missing key features: A native email client for one, and direct access to RIM’s popular BBM messaging service.

Amid those feature misses and lackluster sales, I suggested that RIM made a mistake by putting QNX on a tablet before using it to power BlackBerry smartphones. In hindsight, however, it appears that RIM had little choice: It was reportedly having problems getting the BBM service on PlayBooks because the service is limited to a single device per user. And it took nearly a year to get a native email app on the tablet. It appears to me now — as it did then — that RIM was simply trying to beat others into the nascent and quickly growing tablet market that began in earnest with the iPad in 2010. As a result, it launched a product well before perfecting the experience.

So why is this time different?

We’ll know more after Wednesday’s BB 10 launch in New York City, but hints of potential success for RIM are popping up all over the web. First up is the hardware, expected to be two initial handsets; one with a physical keyboard and one, dubbed the Z10, without. From the various leaked images and video of what’s likely a developer phone model in use, they appear perfectly capable and comparable in performance to other high-end smartphones available today.

What about the operating system? Considering that RIM originally planned to have a new platform on phones by early 2012, it has had an extra year to work on BB 10. That year proved tumultuous with the co-CEOs stepping down, market share dropping, pleas to developers to stay the course and barely any growth in BlackBerry subscribers. From the little bit of BB 10 I’ve seen so far, however, the wait may be worth it.

Expect to hear much about BlackBerry Flow at the launch event: This is RIM’s tightly integrated method of quickly navigating through the operating system in a consistent manner. BlackBerry Hub is the centralized communications center while the BlackBerry software keyboard should provide for fast, accurate entry.

There’s more to smartphone success than hardware and the OS, however. It seems like RIM has also learned the lesson that mobile apps and content deals are also important. On the app side, the company has put enormous effort into courting developers, even poking fun at itself in a music video. (Hear what RIM’s Alec Saunders has to say about that in our podcast interview.)

As a result, tens of thousands of apps are likely to be available once the new devices launch. And just today, RIM shared details of its unified content store, listing out all of the media partners, along with news of next-day television content availability. Add in support from carriers — all four major operators in the US plan to sell the new BlackBerry devices — and the puzzle pieces of potential are all there.

The most likely outcome

What are the odds that Research In Motion has a hit with the new BlackBerry 10 devices? I’ll have a better idea when I attend the launch event, of course — and I’ll be live-blogging from there — but based on the limited information I have so far, RIM should at least be staying in the smartphone game.

As I’ve said to many over the past few months, the new devices should appeal to current BlackBerry owners. My unanswered question now is: Will there be enough to sway people away from iOS and Android phones? Until we know more, I think it’s a safe bet that RIM keeps its current user-base happy and possibly steals some market share from its peers.

Either way, if RIM delivers what I expect in BB 10, it stays relevant in a market where nearly 6 billion people don’t yet have a smartphone. There’s much growth to be found yet, even if BB 10 doesn’t unseat the current smartphone incumbents. But even with the right recipe and ingredients, there’s no guarantees for RIM. Challenges still loom for the company as whole and maintaining a sliver of market share may not be enough for the long road ahead.

Facebook has just rolled out an update to its iOS app that brings features that previously launched on Facebook Messenger for both iOS and Android.

Starting today, you can now send voice messages from within the Facebook app.

Earlier this month, Facebook added voice messaging to its Facebook Messenger app. That was later bolstered with free VoIP calling in the U.S. and Canada from within the app.

Users now also have the ability to record and share videos from inside the app as well.

The last update to Facebook for iOS was a speed boost back in mid-December.

You can grab the updated app from the App Store right now.

Microsoft is announcing something Office-related tomorrow, January 29th. That much is clear given all of the evidence that popped up over the weekend and has continued to mount today. Still, the company likes to hold some secrets and stating something emphatically would be inappropriate reporting on my part. However, trying to connect the dots is a fun exercise that we certainly can do.

First, over the weekend a new website from Microsoft appeared with a teaser message —  “Coming January 29th. More time to do the things you want. #timeto365”.

Then today, John Callaham reported on Neowin that actress Felicity Huffman, of Desperate Housewives fame,  had posted a tweet that stated “Packing up to brave the cold in NYC to help launch MS Office 365, use it, love it. Excited to see some plays”. Okay that last sentence is irrelevant to this story, but it was part of the entire quote. Even Microsoft’s own Twitter account tweets teasers.

We also have heard that Office 2013, which is integrated with the online Office 365, will launch in early 2013 — we even have received pricing details.

Still, as I stated earlier, Microsoft is playing the Apple game these days. Attempting to keep secrets and hold big press events. When I reached out earlier to a spokesperson I was told, despite all of this, that “we have nothing more to share at this time”. So, we wait until tomorrow for what seems obvious, but can not yet be called official, despite the best evidence and hunches.

Oh, hell, surely the official Office Twitter account is confirmation enough. Could Microsoft be any less obvious?

German music rights group GEMA has filed a lawsuit against YouTube, alleging that the video site is misleading users about the details of an ongoing licensing dispute between the two parties. The lawsuit is the latest escalation in that dispute, which has been going on since 2010, and resulted in German YouTube users being unable to view many popular music videos on the site. GEMA is now asking a Munich-based court to issue a cease-and-desist order in order to prevent YouTube from blaming GEMA for this mess.

I know, it’s confusing, but bear with me. Here’s what happened so far: GEMA, which represents recording artists as well as publishers, wants YouTube to pay a fee for each and every video viewed on the site that contains music of one of the artists represented by GEMA (which include every major label artist, as well as most indies). YouTube has rejected that approach, and instead wants to pay a percentage of the ad revenue it makes with those videos.

Negotiations between both parties broke down in 2010, and GEMA asked YouTube to block videos containing music of some 600 artists. YouTube responded by blocking a wide range of videos, telling users that these videos are “unfortunately not available in Germany” because they could contain music for which GEMA hadn’t granted the rights to YouTube.

GEMA officials have long complained that this wasn’t true, suggesting instead that YouTube simply didn’t pay for licenses to these rights. Of course, the licenses that YouTube is offering are based on the rates that YouTube is challenging, so it’s pretty much semantics and fingerpointing.

Except, most users are upset about GEMA, and the group apparently doesn’t want to shoulder all the blame anymore. GEMA’s CEO Harald Heker told local paper Wirtschaftswoche that YouTube’s handling of the blocking is “pure demagogy.”

A YouTube spokesperson sent me the following comment about the lawsuit:

“YouTube believes that rights holders and artists should benefit from their work. We have dozens of collection society deals in place across more than 40 countries because we provide an important source of income for musicians and a platform where new artists can be discovered and promoted. We are open for negotiations to find a solution with GEMA compatible with YouTube’s business model so that we can again provide a source of revenue for musicians and a vibrant platform for music lovers in Germany.”

So there you have it. Each side wants to sound completely reasonable as, all the while, the actual licensing dispute drags out further and further. At this point, it’s pretty unlikely that German YouTube users are going to get access to their music videos any time soon.

Image courtesy of Flickr user  nyghtowl.

In a move that’s hard to say wasn’t expected, Twitter’s new six-second video sharing app Vine has begun to filter out some porn-related searches.

No longer can you search for the tags #porn, #boobs, #dick, #sex and many other NSFW tags.

Oddly enough, you can still search for the #NSFW tag.

Also available are more specific tags that contain plenty of nudity such as #pornvine, #dicks, and more. It appears that Vine is just beginning the process of censoring these types of tags. Before it’s said and done, it’s unlikely that any of these kinds of porn-related tags will remain. And Vine will probably censor any new porn tags as soon as they pop up.

What users can do, however, is tag their Vine videos with these tags. Users can still access the tag pages by clicking on the tags under videos they do find. So there’s a workaround – for now. Still, many popular NSFW tags no longer appear when users try to explore them.

It appears that there had already been a small change in Apple’s promotion of Vine inside the App Store which was conspicuously timed with this porn controversy.

For more on the Vine-porn controversy, check out our in-depth writeup.

Yahoo just released its earnings for the fourth quarter and full year 2012, beating analysts’ expectations, and perhaps more noteworthy, showing solid signs for Yahoo’s search business.

GAAP revenue for the quarter was $1,346 million. For the year, it was $4,987 million. Revenue ex-TAC for the quarter were $1,221 million. For the year, they were $4,468 million. Non-GAAP income from operations was $283 million. For the year, it was $825 million.

GAAP search revenue for the quarter was $482 million, up 4% year-over-year. GAAP search revenue was $1,886 million for the year, up 2% year-over-year. Search revenue ex-TAC was $427 million for the quarte (up 14% year-over-year) and $1,611 million for the year (up 9% year-over-year). Paid clicks were up 11% year-over-year and 8% quarter over quarter. PPCs increased by 1% year-over-year, but decreased by 2% quarter-over-quarter.

CEO Marissa Mayer said, “I’m proud of Yahoo!’s 2012 and fourth quarter results. In 2012, Yahoo! exhibited revenue growth for the first time in 4 years, with revenue up 2 percent year-over-year. During the quarter we made progress by growing our executive team, signing key partnerships including those with NBC Sports and CBS Television, and launching terrific mobile experiences for Yahoo! Mail and Flickr. At the same time, we achieved tremendous internal transformation in the culture, energy and execution of the Company.”

Here’s the release in its entirety:

SUNNYVALE, Calif.–(BUSINESS WIRE)– Yahoo! Inc. (NASDAQ: YHOO) today reported results for the fourth quarter and full year endedDecember 31, 2012.

			Q4 2012			Full Year 2012
GAAP revenue			$1,346 million			$4,987 million
Revenue ex-TAC			$1,221 million			$4,468 million
GAAP income from operations			$190 million			$566 million
Non-GAAP income from operations			$283 million			$825 million
GAAP net earnings per diluted share			$0.23			$3.28
Non-GAAP net earnings per diluted share			$0.32			$1.17

“I’m proud of Yahoo!’s 2012 and fourth quarter results. In 2012, Yahoo! exhibited revenue growth for the first time in 4 years, with revenue up 2 percent year-over-year,” said Yahoo! CEO Marissa Mayer. “During the quarter we made progress by growing our executive team, signing key partnerships including those with NBC Sports and CBS Television, and launching terrific mobile experiences for Yahoo! Mail and Flickr. At the same time, we achieved tremendous internal transformation in the culture, energy and execution of the Company.”

GAAP revenue was $1,346 million for the fourth quarter of 2012, a 2 percent increase from the fourth quarter of 2011. Revenue excluding traffic acquisition costs (“revenue ex-TAC”) was $1,221 million for the fourth quarter of 2012, a 4 percent increase compared to the fourth quarter of 2011. GAAP revenue was $4,987 million for the full year of 2012, flat compared to the prior year. Revenue ex-TAC was $4,468 million for the full year of 2012, a 2 percent increase from the prior year.

Adjusted EBITDA for the fourth quarter of 2012 was $509 million, an 8 percent increase from the same period of 2011. Adjusted EBITDA was$1,699 million for the full year of 2012, a 3 percent increase from the prior year.

GAAP income from operations decreased 22 percent to $190 million in the fourth quarter of 2012, compared to $242 million in the fourth quarter of 2011. Non-GAAP income from operations was $283 million in the fourth quarter of 2012 compared to $259 million in the fourth quarter of 2011. GAAP income from operations for the full year of 2012 was $566 million, compared to $800 million for the prior year. Non-GAAP income from operations was $825 million in both years.

GAAP net earnings for the fourth quarter of 2012 was $272 million, an 8 percent decrease from the same period of 2011. Non-GAAP net earnings for the fourth quarter of 2012 was $370 million, a 20 percent increase from the same period of 2011. GAAP net earnings for the full year of 2012 was $3,945 million, compared to $1,049 million for the prior year. For the full year of 2012, GAAP net earnings included a net gain of $2,755 million related to the sale of Alibaba shares. Non-GAAP net earnings for the full year of 2012 was $1,407 million, a 35 percent increase from the prior year.

GAAP net earnings per diluted share was $0.23 in the fourth quarter of 2012, compared to $0.24 in the fourth quarter of 2011. Non-GAAP net earnings per diluted share was $0.32 in the fourth quarter of 2012, compared to $0.25 in the fourth quarter of 2011. GAAP net earnings per diluted share was $3.28 for the full year of 2012, compared to $0.82 for the prior year. For the full year of 2012, GAAP net earnings included a net gain of $2,755 million, or $2.29 per diluted share, related to the sale of Alibaba shares. Non-GAAP net earnings per diluted share was$1.17 for the full year of 2012, compared to $0.81 for the prior year.

Business Highlights

• Yahoo! further strengthened its board of directors, appointing Max Levchin, a computer scientist, serial entrepreneur and angel investor with extensive experience building enduring Internet companies.
• The Company made significant improvements to two of its core products, Yahoo! Mail and Flickr. The new Yahoo! Mail is faster, easier to use and available across the Web and on Windows 8, iPhone/iPod touch and Android. Yahoo!’s redesigned Flickr app for iPhone and iPod touch makes it easier to capture, share and discover photos. The new app allows users to share photos by email, with the Flickr community or via Facebook, Twitter or Tumblr.
• Yahoo! signed distribution and branding deals to strengthen two of its leading media properties.
  • Yahoo! Sports and NBC Sports announced a partnership to deliver news, fantasy games, and video coverage of sporting events — combining two of the most trusted names in sports.
  • Yahoo! and CBS Television Distribution launched omg! Insider, a multiplatform entertainment news series that combines the popularity of CBS Television Distribution’s The Insider with the online reach of omg!.
• The Company also announced a deal with Wenner Media to further enhance the content and reach of omg! and Yahoo! Music by joining forces with the Us Weekly, Rolling Stone, and Men’s Journal franchises.
• Yahoo! acquired mobile app developers Stamped and OnTheAir, accelerating the Company’s efforts to build a world-class team of mobile engineers, product managers and designers.
• Yahoo! expanded its partnership with Samsung, enabling Samsung SmartTV users to engage more with their favorite shows and commercials. With the touch of a remote, connected tablet or phone, Samsung SmartTV viewers who use Yahoo!’s Connected TV technologies, can easily access content or offers related to their favorite TV shows or commercials.

Fourth Quarter and Full Year 2012 Financial Highlights

Display

• GAAP display revenue was $591 million for the fourth quarter of 2012, a 3 percent decrease compared to $612 million for the fourth quarter of 2011. GAAP display revenue was $2,143 million for the full year of 2012, a 1 percent decrease compared to $2,160 millionfor the prior year.
• Display revenue ex-TAC was $520 million for the fourth quarter of 2012, a 5 percent decrease compared to $546 million for the fourth quarter of 2011. Display revenue ex-TAC was $1,899 million for the full year of 2012, a 2 percent decrease compared to $1,932 millionfor the prior year.
• The number of ads sold on core Yahoo! Properties decreased approximately 10 percent compared to the fourth quarter of 2011 and increased approximately 3 percent compared to the third quarter of 2012.
• Price-per-ad on core Yahoo! Properties increased approximately 7 percent compared to the fourth quarter of 2011 and increased approximately 15 percent compared to the third quarter of 2012.

Search

• GAAP search revenue was $482 million for the fourth quarter of 2012, a 4 percent increase compared to $465 million for the fourth quarter of 2011. GAAP search revenue was $1,886 million for the full year of 2012, a 2 percent increase compared to $1,853 million for the prior year.
• Search revenue ex-TAC was $427 million for the fourth quarter of 2012, a 14 percent increase compared to $376 million for the fourth quarter of 2011. Search revenue ex-TAC was $1,611 million for the full year of 2012, a 9 percent increase compared to $1,478 millionfor the prior year.
• Paid clicks, or the number of clicks on sponsored listings on Yahoo! Properties and Affiliate sites, increased approximately 11 percent compared to the fourth quarter of 2011 and increased approximately 8 percent compared to the third quarter of 2012.
• Price-per-click increased approximately 1 percent compared to the fourth quarter of 2011 and decreased approximately 2 percent compared to the third quarter of 2012.

Cash Balance

• Cash, cash equivalents, and investments in marketable debt securities were $6 billion at December 31, 2012 compared to $2.5 billionat December 31, 2011, an increase of $3.5 billion.
• During the fourth quarter of 2012, Yahoo! repurchased 80 million shares for $1.5 billion. During the year ended December 31, 2012,Yahoo! repurchased 126 million shares for $2.2 billion.

Conference Call

Yahoo! will host a conference call to discuss fourth quarter and full year 2012 results at 5 p.m. Eastern Time today. On the conference call,Yahoo! will also provide its business outlook for the first quarter and full year of 2013. A live Webcast of the conference call, together with supplemental financial information, can be accessed through the Company’s Investor Relations Website athttp://investor.yahoo.com/results.cfm. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available for one week following the conference call by calling (888) 286-8010 or (617) 801-6888, reservation number: 30622830.

Non-GAAP Financial Measures

This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow.

Revenue ex-TAC is GAAP revenue less traffic acquisition costs. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings and non-GAAP earnings per diluted share exclude certain gains, losses, and expenses that we do not believe are indicative of ongoing results. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees.

These measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Financial Statements,” “Supplemental Financial Data and GAAP to Non-GAAP Reconciliations,” and “GAAP to Non-GAAP Reconciliations.”

About Yahoo!

Yahoo! is focused on making the world’s daily habits inspiring and entertaining. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the globe. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. Yahoo! is headquartered in Sunnyvale, Calif., and has offices located throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the company blog (yodel.yahoo.com).

“Affiliates” refers to the third-party entities that have integrated Yahoo!’s advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”).

“Alibaba” means Alibaba Group Holding Limited.

“Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo! and Microsoft Corporation, as amended.

“TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo! Properties.

“Yahoo! Properties” refers to the online properties and services that Yahoo! provides to users.

This press release contains forward-looking statements concerning Yahoo!’s expected financial performance and Yahoo!’s strategic and operational plans (including, without limitation, the quotation from management). Risks and uncertainties may cause actual results to differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the impact of changes to our management, organizational structure and strategic business plan;Yahoo!’s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks associated with the Search Agreement with Microsoft Corporation; risks related to Yahoo!’s regulatory environment; interruptions or delays in the provision of Yahoo!’s services; security breaches; acceptance by users of new products and services; risks related to joint ventures and the integration of acquisitions; risks related to Yahoo!’s international operations; adverse results in litigation; Yahoo!’s ability to protect its intellectual property and the value of its brands; dependence on third parties for technology, services, content, and distribution; and general economic conditions. All information set forth in this press release and its attachments is as of January 28, 2013. Yahoo! does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect the Company’s business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, as amended, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, which are on file with the SEC and available on the SEC’s website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo!’s Annual Report on Form 10-K for the year ended December 31, 2012, which will be filed with the SEC in the first quarter of 2013.

Yahoo!, the Yahoo! logos, omg! and Flickr are trademarks and/or registered trademarks of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners.

Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
					December 31,				December 31,
					2011				2012
ASSETS
Current assets:
Cash and cash equivalents					$	1,562,390			$	2,667,778
Short-term marketable debt securities						493,189				1,516,175
Accounts receivable, net						1,037,474				1,008,448
Prepaid expenses and other current assets						359,483				460,312
Total current assets						3,452,536				5,652,713
Long-term marketable debt securities						474,338				1,838,425
Alibaba Group Preference Shares						–				816,261
Property and equipment, net						1,730,888				1,685,845
Goodwill						3,900,752				3,826,749
Intangible assets, net						254,600				153,973
Other long-term assets						220,628				289,130
Investments in equity interests						4,749,044				2,840,157
Total assets					$	14,782,786			$	17,103,253
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable					$	166,595			$	184,831
Accrued expenses and other current liabilities						846,044				808,475
Deferred revenue						194,722				296,926
Total current liabilities						1,207,361				1,290,232
Long-term deferred revenue						43,639				407,560
Capital lease and other long-term liabilities						134,905				124,587
Deferred and other long-term tax liabilities, net						815,534				675,271
Total liabilities						2,201,439				2,497,650
Total Yahoo! Inc. stockholders’ equity						12,541,067				14,560,200
Noncontrolling interests						40,280				45,403
Total equity						12,581,347				14,605,603
Total liabilities and equity					$	14,782,786			$	17,103,253

 

Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
		Three Months Ended								Year Ended
		December 31,								December 31,
		2011				2012				2011				2012
Revenue		$	1,324,153			$	1,345,807			$	4,984,199			$	4,986,566
Operating expenses:
Cost of revenue – Traffic acquisition costs			155,453				124,961				603,371				518,906
Cost of revenue – Other			263,609				287,147				983,626				1,101,660
Sales and marketing			289,366				274,122				1,122,193				1,101,572
Product development			235,810				240,417				919,368				885,824
General and administrative			112,614				144,610				497,288				540,247
Amortization of intangibles			8,525				7,926				33,592				35,819
Restructuring charges, net			16,329				76,634				24,420				236,170
Total operating expenses			1,081,706				1,155,817				4,183,858				4,420,198
Income from operations			242,447				189,990				800,341				566,368
Other income, net			9,768				17,730				27,175				4,647,839
Income before income taxes and earnings in equity interests			252,215				207,720				827,516				5,214,207
Provision for income taxes			(78,287	)			(83,007	)			(241,767	)			(1,940,043	)
Earnings in equity interests			127,063				148,939				476,920				676,438
Net income			300,991				273,652				1,062,669				3,950,602
Less: Net income attributable to noncontrolling interests			(5,419	)			(1,385	)			(13,842	)			(5,123	)
Net income attributable to Yahoo! Inc.		$	295,572			$	272,267			$	1,048,827			$	3,945,479
Net income attributable to Yahoo! Inc. common stockholders per share – diluted		$	0.24			$	0.23			$	0.82			$	3.28
Shares used in per share calculation – diluted			1,241,009				1,168,336				1,282,282				1,202,906
Stock-based compensation expense by function:
Cost of revenue – Other		$	1,010			$	2,207			$	3,489			$	10,078
Sales and marketing			22,291				22,161				65,120				82,115
Product development			25,291				19,955				89,587				74,284
General and administrative			10,255				13,139				45,762				57,888
Restructuring expense accelerations (reversals), net			1,492				–				214				(3,429	)
Supplemental Financial Data:
Revenue ex-TAC		$	1,168,700			$	1,220,846			$	4,380,828			$	4,467,660
Adjusted EBITDA		$	469,453			$	509,024			$	1,654,583			$	1,698,839
Free cash flow(1)(2)		$	327,013			$	(2,044,502	)		$	725,801			$	(834,865	)

(1)		The year ended December 31, 2012 includes a payment of $550 million from Alibaba in satisfaction of certain future royalty payments under the existing technology and intellectual property license agreement with Alibaba.
(2)		The three months and year ended December 31, 2012 include a cash tax payment of $2.3 billion which is related to the sale of Alibabashares.

 

Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
		Three Months Ended											Year Ended
		December 31,										December 31,
		2011						2012				2011						2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	300,991				$	273,652				$	1,062,669				$	3,950,602
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			125,693					148,213					530,516					549,235
Amortization of intangible assets			29,939					21,279					117,723					105,366
Stock-based compensation expense, net			60,339					57,462					204,172					220,936
Non-cash restructuring charges			990					69,434					990					109,896
Accrued dividend income related to Alibaba Group Preference Shares			–					(20,000	)				–					(20,000	)
Tax benefits (detriments) from stock-based awards			23,523					(21,969	)				33,497					(31,440	)
Excess tax benefits from stock-based awards			(25,966	)				(5,093	)				(70,680	)				(35,844	)
Deferred income taxes			1,652					121,968					70,392					(769,320	)
Earnings in equity interests			(127,063	)				(148,939	)				(476,920	)				(676,438	)
Dividends received from Yahoo Japan			–					–					75,391					83,648
Gain related to sale of Alibaba Group shares			–					–					–					(4,603,322	)
Gain from sale of investments, assets, and other, net			(8,416	)				6,468					4,405					(11,840	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net			(117,992	)				(52,190	)				38,100					34,752
Prepaid expenses and other			87,441					37,470					97,849					78,529
Accounts payable			27,000					35,204					(316	)				12,747
Accrued expenses and other liabilities			61,012					(2,373,163	)				(290,070	)				255,799
Deferred revenue			(7,809	)				(49,671	)				(73,912	)				465,140
Net cash provided by (used in) operating activities (1)(2)			431,334					(1,899,875	)				1,323,806					(281,554	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net			(130,287	)				(149,720	)				(593,294	)				(505,507	)
Purchases of marketable debt securities			(95,232	)				(1,681,467	)				(1,708,530	)				(3,520,327	)
Proceeds from sales of marketable debt securities			441,719					56,968					1,508,948					741,947
Proceeds from maturities of marketable debt securities			89,305					130,750					1,316,197					381,403
Proceeds related to sale of Alibaba shares, net			–					–					–					6,247,728
Purchases of intangible assets			(799	)				(711	)				(11,819	)				(3,799	)
Proceeds from the sale of investments			–					–					21,271					26,132
Acquisitions, net of cash acquired			(255,018	)				(5,716	)				(323,830	)				(5,716	)
Other investing activities, net			(818	)				9,604					(6,581	)				183
Net cash provided by (used in) investing activities			48,870					(1,640,292	)				202,362					3,362,044
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net			49,529					101,951					156,226					218,371
Repurchases of common stock			(416,237	)				(1,451,462	)				(1,618,741	)				(2,167,841	)
Excess tax benefits from stock-based awards			25,966					5,093					70,680					35,844
Tax withholdings related to net share settlements of restricted stock awards and restricted stock units			(8,712	)				(12,842	)				(44,761	)				(60,939	)
Other financing activities, net			(11,029	)				(1,373	)				(19,362	)				(4,892	)
Net cash used in financing activities			(360,483	)				(1,358,633	)				(1,455,958	)				(1,979,457	)
Effect of exchange rate changes on cash and cash equivalents			(21,550	)				6,178					(34,247	)				4,355
Net change in cash and cash equivalents			98,171					(4,892,622	)				35,963					1,105,388
Cash and cash equivalents, beginning of period			1,464,219					7,560,400					1,526,427					1,562,390
Cash and cash equivalents, end of period		$	1,562,390				$	2,667,778				$	1,562,390				$	2,667,778

	(1)		The year ended December 31, 2012 includes a payment of $550 million from Alibaba in satisfaction of certain future royalty payments under the existing technology and intellectual property license agreement with Alibaba.
	(2)		The three months and year ended December 31, 2012 include a cash tax payment of $2.3 billion which is related to the sale of Alibabashares.

 

Yahoo! Inc.

Note to Unaudited Condensed Consolidated Financial Statements

This press release and its attachments include the non-GAAP financial measures of revenue excluding traffic acquisition costs (“revenue ex-TAC”); adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow, which are reconciled to revenue; net income attributable to Yahoo! Inc. (in the case of adjusted EBITDA and non-GAAP net earnings); income from operations; net income attributable to Yahoo! Inc. common stockholders per share — diluted; and net cash provided by (used in) operating activities, which we believe are the most comparable GAAP measures. We use these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, net income attributable to Yahoo! Inc., income from operations, net income attributable to Yahoo! Inc. common stockholders per share – diluted and net cash provided by (used in) operating activities, calculated in accordance with GAAP.

Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC. TAC consists of payments made to third-party entities that have integrated our advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”) and payments made to companies that direct consumer and business traffic to Yahoo!’s online properties and services (“Yahoo! Properties”). Based on the terms of the Search Agreement with Microsoft, Microsoft retains a revenue share of 12 percent of the net (after TAC) search revenue generated on Yahoo! Properties and Affiliate sites in transitioned markets. Yahoo! reports the net revenue it receives under the Search Agreement as revenue and no longer presents the associated TAC. Accordingly, for transitioned markets Yahoo! reports GAAP revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. For markets that have not yet transitioned, revenue continues to be recorded on a gross basis, and TAC is recorded as a part of operating expenses. We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes during the Microsoft transition and to provide investors with comparable revenue numbers when comparing periods preceding, during and following the transition period. A limitation of revenue ex-TAC is that it is a measure which we have defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry who have similar business arrangements but address the impact of TAC differently. Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and total operating expenses, which includes TAC in non-transitioned markets.

Adjusted EBITDA is defined as net income attributable to Yahoo! Inc. before taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results. Yahoo! presents adjusted EBITDA because the exclusion of certain gains, losses, and expenses facilitates comparisons of the operating performance of our Company on a period to period basis. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. These limitations include: adjusted EBITDA does not reflect tax payments and such payments reflect a reduction in cash available to us; adjusted EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses; adjusted EBITDA does not include stock-based compensation expense related to the Company’s workforce; adjusted EBITDA also excludes other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results, and these items may represent a reduction or increase in cash available to us; and adjusted EBITDA is a measure that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry. Management compensates for these limitations by also relying on the comparable GAAP financial measure of net income attributable to Yahoo! Inc., which includes taxes, depreciation, amortization, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and the other gains, losses and expenses that are excluded from adjusted EBITDA.

Non-GAAP income from operations is defined as income from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.

Non-GAAP net earnings is defined as net income attributable to Yahoo! Inc. excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results. We consider non-GAAP net earnings and non-GAAP net earnings per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net earnings and non-GAAP net earnings per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income attributable to Yahoo! Inc. and net income attributable to Yahoo! Inc.common stockholders per share – diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net earnings and non-GAAP net earnings per diluted share.

Free cash flow is a non-GAAP financial measure defined as net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company’s business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company’s unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

Yahoo! Inc.
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations
(in thousands)
							Three Months Ended								Year Ended
							December 31,								December 31,
								2011				2012				2011				2012
			Revenue for groups of similar services:
			Display				$	612,047			$	590,627			$	2,160,309			$	2,142,818
			Search					464,530				481,957				1,853,110				1,885,860
			Other					247,576				273,223				970,780				957,888
			Total revenue				$	1,324,153			$	1,345,807			$	4,984,199			$	4,986,566
			Revenue excluding traffic acquisition costs (“revenue ex-TAC”) for groups of similar services:
			GAAP display revenue				$	612,047			$	590,627			$	2,160,309			$	2,142,818
			TAC associated with display revenue					(66,426	)			(70,218	)			(227,822	)			(243,557	)
			Display revenue ex-TAC				$	545,621			$	520,409			$	1,932,487			$	1,899,261
			GAAP search revenue				$	464,530			$	481,957			$	1,853,110			$	1,885,860
			TAC associated with search revenue for non-transitioned markets					(89,027	)			(54,743	)			(375,409	)			(275,349	)
			Search revenue ex-TAC				$	375,503			$	427,214			$	1,477,701			$	1,610,511
			Other GAAP revenue				$	247,576			$	273,223			$	970,780			$	957,888
			TAC associated with other GAAP revenue					–				–				(140	)			–
			Other revenue ex-TAC				$	247,576			$	273,223			$	970,640			$	957,888
			Revenue ex-TAC:
			GAAP revenue				$	1,324,153			$	1,345,807			$	4,984,199			$	4,986,566
			TAC					(155,453	)			(124,961	)			(603,371	)			(518,906	)
			Revenue ex-TAC				$	1,168,700			$	1,220,846			$	4,380,828			$	4,467,660
			Revenue ex-TAC by segment:
			Americas:
			GAAP revenue				$	884,780			$	960,118			$	3,302,989			$	3,461,633
			TAC					(45,072	)			(52,357	)			(160,110	)			(182,511	)
			Revenue ex-TAC				$	839,708			$	907,761			$	3,142,879			$	3,279,122
			EMEA:
			GAAP revenue				$	164,238			$	113,527			$	629,383			$	472,061
			TAC					(54,559	)			(16,982	)			(221,916	)			(114,230	)
			Revenue ex-TAC				$	109,679			$	96,545			$	407,467			$	357,831
			Asia Pacific:
			GAAP revenue				$	275,135			$	272,162			$	1,051,827			$	1,052,872
			TAC					(55,822	)			(55,622	)			(221,345	)			(222,165	)
			Revenue ex-TAC				$	219,313			$	216,540			$	830,482			$	830,707
			Total revenue ex-TAC				$	1,168,700			$	1,220,846			$	4,380,828			$	4,467,660
			Direct costs by segment (3):
			Americas				$	187,467			$	183,236			$	696,103			$	733,316
			EMEA					41,615				41,325				165,750				161,990
			Asia Pacific					55,361				60,046				225,417				224,114
			Global operating costs (4)					414,804				443,272				1,638,975				1,671,958
			Restructuring charges, net					16,329				76,634				24,420				236,170
			Depreciation and amortization					151,830				168,769				625,864				649,267
			Stock-based compensation expense					58,847				57,574				203,958				224,477
			Income from operations				$	242,447			$	189,990			$	800,341			$	566,368
			Reconciliation of net income attributable to Yahoo! Inc. to adjusted EBITDA:
			Net income attributable to Yahoo! Inc.				$	295,572			$	272,267			$	1,048,827			$	3,945,479
			Costs associated with the Korea business and its closure (5)					–				99,485				–				99,485
			Deal-related costs related to the sale of Alibaba shares					–				–				–				6,500
			Depreciation and amortization					151,830				168,769				625,864				649,267
			Stock-based compensation expense					58,847				57,574				203,958				224,477
			Restructuring charges, net (5)					16,329				(6,794	)			24,420				152,742
			Other income, net					(9,768	)			(17,730	)			(27,175	)			(4,647,839	)
			Provision for income taxes					78,287				83,007				241,767				1,940,043
			Earnings in equity interests					(127,063	)			(148,939	)			(476,920	)			(676,438	)
			Net income attributable to noncontrolling interests					5,419				1,385				13,842				5,123
			Adjusted EBITDA				$	469,453			$	509,024			$	1,654,583			$	1,698,839
			Reconciliation of net cash provided by (used in) operating activities to free cash flow:
			Cash provided by (used in) operating activities				$	431,334			$	(1,899,875	)		$	1,323,806			$	(281,554	)
			Acquisition of property and equipment, net					(130,287	)			(149,720	)			(593,294	)			(505,507	)
			Dividends received from equity investees					–				–				(75,391	)			(83,648	)
			Excess tax benefits from stock-based awards					25,966				5,093				70,680				35,844
			Free cash flow (1)(2)				$	327,013			$	(2,044,502	)		$	725,801			$	(834,865	)

		(1)		The year ended December 31, 2012 includes a payment of $550 million from Alibaba in satisfaction of certain future royalty payments under the existing technology and intellectual property license agreement with Alibaba.
		(2)		The three months and year ended December 31, 2012 include a cash tax payment of $2.3 billion which is related to the sale of Alibabashares.
		(3)		Direct costs for each segment include cost of revenue (excluding TAC) and other operating expenses that are directly attributable to the segment such as employee compensation expense (excluding stock-based compensation expense), local sales and marketing expenses, and facilities expenses. Beginning in 2012, marketing and customer advocacy costs are managed locally and included as direct costs for each segment. Prior period amounts have been revised to conform to the current presentation.
		(4)		Global operating costs include product development, service engineering and operations, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment. Prior to 2012, marketing and customer advocacy costs were managed on a global basis and included as global operating costs. Prior period amounts have been revised to conform to the current presentation.
		(5)		For the three months and year ended December 31, 2012, costs associated with the Korea business and its closure include $83 million of restructuring charges.

 

Yahoo! Inc.
GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
			Three Months Ended
			December 31,
			2011				2012
GAAP Income from operations			$	242,447			$	189,990
(a)	Costs associated with the Korea business and its closure			–				99,485
(b)	Restructuring charges, net (6)			16,329				(6,794	)
Non-GAAP Income from operations			$	258,776			$	282,681
GAAP Net income attributable to Yahoo! Inc.			$	295,572			$	272,267
(a)	Costs associated with the Korea business and its closure			–				99,485
(b)	Restructuring charges, net (6)			16,329				(6,794	)
(c)	To adjust the provision for income taxes to exclude the tax impact of items (a) and (b) above for the three months ended December 31, 2011 and 2012			(5,192	)			4,626
Non-GAAP Net earnings			$	306,709			$	369,584
GAAP Net income attributable to Yahoo! Inc. common stockholders per share – diluted			$	0.24			$	0.23
Non-GAAP Net earnings per share – diluted			$	0.25			$	0.32
Shares used in per share calculation – diluted				1,241,009				1,168,336
			Year Ended
			December 31,
			2011				2012
GAAP Income from operations			$	800,341			$	566,368
(a)	Costs associated with the Korea business and its closure			–				99,485
(b)	Restructuring charges, net (6)			24,420				152,742
(c)	Deal-related costs related to the sale of Alibaba shares			–				6,500
Non-GAAP Income from operations			$	824,761			$	825,095
GAAP Net income attributable to Yahoo! Inc.			$	1,048,827			$	3,945,479
(a)	Costs associated with the Korea business and its closure			–				99,485
(b)	Restructuring charges, net (6)			24,420				152,742
(c)	Deal-related costs related to the sale of Alibaba shares			–				6,500
(d)	Gain related to sale of Alibaba shares			–				(4,603,322	)
(e)	Non-cash gain related to the dilution of the Company’s ownership interest in Alibaba Group, which is included in earnings in equity interests			(25,083	)			–
(f)	To adjust the provision for income taxes to exclude the tax impact of items (a) through (d) above for the year ended December 31, 2011 and 2012			(7,764	)			1,805,940
Non-GAAP Net earnings			$	1,040,400			$	1,406,824
GAAP Net income attributable to Yahoo! Inc. common stockholders per share – diluted			$	0.82			$	3.28
Non-GAAP Net earnings per share – diluted			$	0.81			$	1.17
Shares used in per share calculation – diluted				1,282,282				1,202,906

(6)

For the three months and year ended December 31, 2012, this amount excludes the restructuring charges related to the Korea business and its closure of $83 million, which is included in item (a) above.

 

Yahoo! Inc.

Keeping with an ongoing trend, Android solidified its global smartphone dominance in fourth quarter and for all 2012, according to Strategy Analytics. The Android Army sent iOS idolaters into retreat during Q4, iPhone 5’s first full three months of sales. Like I explained in September, “Android wins the smartphone wars“.

During fourth quarter, iOS share fell to 19 percent from 23.6 percent a year earlier. Meanwhile, Android rose to 70.1 percent from 51.3 percent. For all 2012, iOS nudged up to 19.4 percent from 19 percent share, while Android reached 68.4 percent, up from 48.7 percent. The differences between the quarter and year, strongly suggest sales surge at the end, for Android, which forebodes poorly for Apple when iOS got big lift from iPhone 5’s recent launch.

Duopoly

“Android’s challenge for 2013 will be to defend its leadership, not only against Apple, but also against an emerging wave of hungry challengers that includes Microsoft, Blackberry, Firefox and Tizen”, Neil Mawston, Strategy Analytics executive director, says.

Four-hundred seventy-nine million Android smartphones shipped in 2012, compared to 135.8 million iPhones, according to Strategy Analytics. Rest of the market: 85.3 million. That puts combined Android/iOS share at 92.1 percent and 87.8 percent for the year.

“The worldwide smartphone industry has effectively become a duopoly as consumer demand has polarized around mass-market Android models and premium Apple designs”, Mawston says. Combined dominance leaves little room for competitors, and refutes earlier IDC predictions about three dominant platforms emerging. The more perplexing question: How skewed will be the split among the two?

Cumulative Android shipments (phones and tablets) reached 500 million in September, according to Google. By comparison, iOS, which had long led the green robot, only reached that number three months later, according to Apple. The company shipped 75 million iOS devices during fourth quarter, which works out to about 834,000 per day. Android activations are more than 1.3 million per day.

Back to handsets, IHS iSuppli now predicts that cumulative Android smartphone shipments will reach 1 billion this year, but iOS not until 2015.

Saturation

Android and iOS compete in a rapidly growing, and in some countries quickly saturating, device category. Annual shipments grew to 700.1 million from 490.5 million. But Android and iOS success rely heavily on two companies — Apple, obviously, and Samsung. For 2012, Samsung shipped 213 million smartphones (mostly Android) and Apple 135.8 million (all iOS). Apple’s problem is the Other category (316.3 million), largely dominated by manufacturers shipping Androids.

“Samsung and Apple together accounted for half of all smartphones shipped worldwide in 2012”, Linda Sui, Strategy Analytics analyst, says. “Large marketing budgets, extensive distribution channels and attractive product portfolios have enabled Samsung and Apple to tighten their grip on the smartphone industry”.

Respective share: 30.4 percent and 19 percent, up from 19.9 percent and 19 percent, respectively. Still, the Other bucket slight trails (45.2 percent) Apple and Samsung combined (49.8 percent).

Still, from another perspective, iPhone had a great quarter, with 47.8 million units shipped, up from 37 million year over year and 26.9 million quarter on quarter. iPhone revenue rose to $30.67 billion in Q4 from $16.25 billion three months earlier. In fourth quarter, iPhone accounted for 56.3 percent of all Apple revenue and 52.7 percent a year earlier.

But success comes with risks. As Android share continues to rise, iOS recedes — and that in a device category destined to rapidly saturate. Market share Android takes today, it is more likely to keep tomorrow, if other platform categories, PC operating systems among them, are comparable.

The question: Is Apple willing to do anything to gain share against Android? During last week’s Apple’s earnings call, Toni Sacconaghi, Sanford Bernstein analyst, asked: “Is holding share in the smartphone market in 2013 a priority for Apple, yes or no and why? And realistically how does Apple hold share given that the market segment and price point that you play in is expected to grow a lot slower and you have pretty dominant share in that high end”.

Apple CEO Tim Cook deflected the answer. But the market will require one. Lower price isn’t the answer, as iPhone 4 is free to buyers, with two-year carrier contract, and Apple couldn’t make enough to meet demand during fourth quarter. Too bad iOS licensing is sacrilege in Apple’s sacred halls. Mr. Cook, perhaps it’s time for some new religion.

Photo Credit: Joe Wilcox