AP
Yahoo 3Q Earnings Decline Slightly
Tuesday October 16, 6:24 pm ET
By Michael Liedtke, AP Business Writer
Yahoo 3rd-Quarter Earnings Slip on Rising Operating Costs but Beat Wall Street Expectations


SAN FRANCISCO (AP) -- Yahoo Inc.'s third-quarter profit slipped less than analysts feared, raising hopes that the slumping Internet powerhouse can deliver on the comeback promises of a new management team that took over four months ago.

The prospect of better times lifted Yahoo's stock price more than 9 percent late Tuesday.

The Sunnyvale-based company said it earned $151.3 million during the three months ended in September. That was 5 percent less than its net income of $158.5 million in the same period last year.

The earnings were 11 cents per share in both periods because Yahoo bought back some of its stock in an attempt to bolster its eroding market value.

Analysts had low expectations after Yahoo struggled through the first half of the year in spite of an online advertising boom. The company's third-quarter results exceeded the average earnings estimate of 8 cents per share among analysts surveyed by Thomson Financial.

Revenue for the period totaled $1.77 billion, a 12 percent improvement from last year.

After subtracting commissions paid to Yahoo's advertising partners, revenue stood at $1.28 billion -- nearly $40 million above the average analyst estimate, according to Thomson Financial.

Investors cheered the news, released after the stock market closed. Yahoo's stock price surged $2.52, or 9.4 percent, in extended trading after finishing Tuesday's regular session at $26.69, down $1.17.

"We have a lot more work to do, but we are genuinely excited about where the company is headed," Jerry Yang, Yahoo's chief executive, told analysts during a Tuesday conference call.

Yang, Yahoo's co-founder, became CEO in mid-June when Chairman Terry Semel stepped aside under pressure from disgruntled shareholders. He and Susan Decker, a longtime Yahoo executive who was promoted as part the June shake up, are retooling the company in an effort to regain some of the ground lost to online search leader Google Inc. during recent years.

In the process, Yahoo hopes to grab a bigger chunk of the money that advertisers are spending on the Internet to connect with consumers who are surfing the Web instead of watching television, listening to the radio or reading newspapers and magazines.

Toward that end, Yahoo has been expanding the reach of its advertising network through acquisitions and partnerships with other Web sites. The company also has upgraded its system for delivering text-based ads tied to search requests -- the approach that generates most of Google's profits.

In a coup announced Tuesday, Yahoo said it will replace Google as the provider of search-driven advertising to WebMD Health Corp.'s Web sites beginning next month.

Financial details weren't disclosed, but the revenue-sharing agreement will last several years.

Yahoo also disclosed new advertising alliances with Forbes.com, Cars.com and Ziff-Davis Media. Those deals all involve display advertising that usually feature images and other graphics.