Earnings Climb Nearly 8% at Yahoo

SAN FRANCISCO — Carol Bartz, Yahoo’s chief executive, is known for peppering her public presentations with the odd expletive or two. But her conference call Tuesday to discuss Yahoo’s second-quarter financial results was entirely family-friendly. Then again, Ms. Bartz did not have much to swear about.


Paul Sakuma/Associated Press
“I think Microsoft should be getting kudos for Bing,” Carol Bartz, Yahoo’s chief, said in a conference call with investors.
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Times Topics: Yahoo! Inc.

Yahoo’s revenue declined 13 percent in the second quarter as advertisers continued to reduce spending in the downturn. But cost-cutting initiatives helped to soften the blow, and profits climbed nearly 8 percent, beating analysts’ expectations.

Yahoo also said that it planned a new round of investment in products and a rebranding campaign, which would lead to a drop in profit in the current quarter. Investors reacted by sending shares down nearly 3 percent in after-hours trading.

“Over all, the long and protracted turnaround process continues,” said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Company. “We don’t see a catalyst that is going to turn things around soon.”

Yahoo continues to discuss a search and advertising partnership with Microsoft that would create a more viable rival to Google. The talks have intensified recently, according to people briefed on them.

Both companies have declined to discuss their talks publicly and, for the first time since Ms. Bartz became chief executive in January, analysts did not ask her about them.

But Ms. Bartz recognized that Yahoo’s search business would fare better with many more users, or more “scale,” and she praised Bing, Microsoft’s new search engine. “I think Microsoft should be getting kudos for Bing,” Ms. Bartz said in a conference call with investors. “They’ve done a nice job.”

Some analysts interpreted those comments as an indication that she appeared more willing to consider a deal than ever before.

“She talked about scale being an issue,” said Ross Sandler, an analyst with RBC Capital Markets. “She talked about Microsoft having a pretty good search engine. That’s all an admission that it might make sense for these parties to come together.”

Yahoo reported net income of $141 million, or 10 cents a share, compared with $131 million, or 9 cents a share, a year earlier. Revenue dropped to $1.57 billion, from $1.8 billion a year earlier.

Net revenue, which excludes commissions paid to advertising partners, was $1.14 billion, down 15 percent from $1.35 billion a year earlier.

On average, Wall Street analysts had expected Yahoo to report net income of 8 cents a share on net revenue of $1.14 billion.

“Considering the economy I am pleased with our results,” Ms. Bartz said. “Over all we are seeing less fear in the marketplace.” Ms. Bartz said advertisers appeared ready to spend more, but she added that it was too early to say how that would affect Yahoo.

Yahoo said search advertising revenue on its sites declined 15 percent, even as the number of searches on Yahoo rose. By comparison, Google, whose business is largely driven by search advertising, last week reported a 3 percent growth in revenue. Analysts said Yahoo did not give good reasons for the disappointing results.

On Tuesday, Yahoo also introduced an overhauled home page, a major initiative intended to restore its luster with users, advertisers and investors.

The new home page allows users to preview Yahoo services like mail and Flickr, and also third-party applications and sites, like Facebook, Gmail or BBC World News, in a section on the left side of the page called My Favorites. As Internet users’ attention is increasingly fragmented across a growing number of sites and services, the company’s decision to include third-party content on its home represents an effort by Yahoo to establish itself as the “center point of people’s lives online,” said Tapan Bhat, a senior vice president at Yahoo who is responsible for the company’s home page.

With 114 million visitors in June in the United States alone, Yahoo.com remains the most visited home page online. But Yahoo’s efforts to cash in on its huge audience have faltered in recent years, as prices for premium brand ads have declined and as advertising networks have given marketers the ability to reach large audiences across vast arrays of Web sites at lower cost. link....