Yahoo Earnings Fall, General Motors May Miss $1 Billion Debt Payment

The markets had mixed results today, as the NASDAQ was up 2.27 points to close at 1646.12, while the other two major indices were down for the day.  The S&P 500 and the Dow Jones finished down 0.77% and 1.04% respectively.  It was a good day for oil as it settled up at $48.85, as did gold, settling at $892.50.  Prices on the 10-year Treasury fell, closing with a yield of 2.942%.

In earnings news, Yahoo (YHOO) reported earnings after hours yesterday, announcing that net income fell to $117.6 million from $537 million a year ago.  Net revenues fell to $1.58 billion from $1.81 billion, as the Sunnyvale, Calif. company saw advertising revenue fall over -3% percent in the first quarter.  These results did not fare well for CEO Carol Bartz, who took over for Jerry Yang earlier this year, as she has been under pressure from shareholders, who are still steaming from not selling the company to Microsoft.  Bartz is doing what she feels is best for the company, planning to cut 5% of jobs, most coming from product managers.  Bartz feels that Yahoo has too many product managers and that this has weighed down the creative process, and limited the productivity of its engineers.  In addition to cutting jobs, Yahoo is also looking at drastically cutting capital expenditures to cut costs in the economic downturn.  Despite the downturn Yahoo still expects to report revenue between $1 and $1.2 million, in line with analyst estimates.  Yahoo’s future looks very hazy with many investors still skeptical about what will happen to their search unit and their relationship with Microsoft (MSFT) moving into the future.

In other earnings news, AT&T (T) reported that profit fell -9.7%, but traded up the entire day as it beat analyst estimates.  The telecom giant reported earnings of $0.53 cents a share on net income of $3.1 billion, far exceeding the street’s average estimate of $0.48 cents a share. However, revenues missed estimates at $30.6 billion as opposed to the projected $31.8 billion.  AT&T felt some pain as consumers continued to move away from landlines and shifting to wireless, as wireless revenues increased 38.6% as wireline revenue fell 16.4%. AT&T was helped significantly by Apple’s (AAPL) iPhone, as it activated 1.6 million iPhone’s this quarter, and believes that a big part of its 1.2 million new wireless cell phone subscribers came to AT&T because of it.  AT&T is hoping to extend its deal with Apple to exclusively sell the iPhone in the US into 2011.

General Motors (GM), said that it is likely that they will miss a $1 billion debt payment that is due on June 1st.  GM delinquency will likely be caused by potential bankruptcy protection or a possible debt-for-equity exchange.  The announcement that GM would not pay the debt on June 1st puts more pressure on creditors to close a deal on a potential debt-for-equity swap.  Bankruptcy and the equity swap look like the only two options for GM right now, as it looks next to impossible for the government to bailout GM.  With everything going wrong for GM, it presents Ford (F) the perfect opportunity to come in and steal market share away from GM.  Ford, who looked liked one of the worst American car companies a year ago, has put itself in a perfect position to dominate Detroit, after its debt-to-equity swap with its shareholders and agreements with the UAW.

Check back tomorrow for another market recap.

Disclosure: The Fund the author is associated with is long T.

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