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Yahoo profits less than expected

Latest update : 2008-07-23

Second-quarter profits of Internet giant Yahoo was 131 millions dollars, below Wall Street's expectations. But revenues were 6% higher than last year, despite failed talks with Microsoft for a takeover.

Struggling Internet pioneer Yahoo reported on Tuesday that its second-quarter profit slipped to 131 million dollars and called on investors to have faith in better times ahead.

Yahoo's net income for the quarter ending June 30 excluding special items amounted to 10 cents per share, two cents below the consensus Wall Street estimate.

However, revenues for the freshly finished quarter were just shy of 1.8 billion dollars, which is six percent more than the California company's second-quarter revenues in 2007.

"Despite the economy and Microsoft we did well," co-founder and chief executive Jerry Yang in a conference call with analysts and media.

"It should be obvious that this has been a challenging time for our employees, yet despite the distractions the dedicated Yahoos have simply done a great job."

Yahoo's quarter was marked by a failed courtship with Microsoft and a bruising battle with billionaire corporate raider Carl Icahn, who accused board members of botching talks with the US software giant.

Yahoo spent 22 million dollars fighting off an unsolicited take-over effort by Microsoft, which offered to buy Yahoo for 44.6 billion dollars in stock and cash on January 31.

Microsoft withdrew its offer on May 3, saying Yahoo refused to budge despite a bid sweetened to nearly 50 billion dollars.

Yahoo later revived talks with Microsoft, with Yahoo rejecting an offer to acquire only its search business and Microsoft saying it is no longer interested in buying all of Yahoo.

Yahoo executives said they are awaiting regulatory approval before consummating a subsequent alliance with Google to pump money from ads posted alongside search results at Yahoo.

Release of the earnings figures apparently buoyed Yahoo stock, which had sunk more than a percent during trading in New York through the day.

Yahoo stock inched back up nearly three percent to 21.99 dollars per share in after-hours trading.

Analysts think Yahoo benefited from its encouraging financial forecast and a truce struck a day earlier with Icahn, ending his fight to oust the Internet pioneer's board.

Yahoo said it will give the billionaire and two of his allies seats on its board of directors in exchange for Icahn withdrawing a slate of nominees he was backing to replace the incumbents.

Unconfirmed reports have surfaced that the deal with Icahn includes replacing Yang as chief executive, possibly with former America Online head Jonathan Miller who is among Icahn's picks for Yahoo's board.

"I think Jerry is tired of being the guy everyone is shooting arrows at," analyst Rob Enderle of Enderle Group said while discussing word Yang is on the way out as "Chief Yahoo."

"Yang never was a CEO guy to begin with; he fell into the role. Jonathan Miller is someone Carl Icahn likes and Yang finds acceptable."

Yahoo's earnings figures indicate shedding less productive workers is in order, and outsiders tend to be more effective at that task, Enderle said.

Yahoo said it continues to see double-digit growth in the number of visits to its online pages and its share of the US Internet search market increased over the prior year, reversing a trend of losing share to Google.

Date created : 2008-07-23