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Yahoo Profits Beat the Street



Yahoo Earnings
Yahoo (NASDAQ: YHOO) reported a more than three-fold profit increase in the third quarter, easily topping analysts' expectations.

The Web pioneer, which has seen its balance sheet suffer amid the advertising slowdown, today said it enjoyed a third-quarter profit of $187 million, or $0.13 per share, up from $54 million, or $0.04 a share, in the same period last year.

Analysts polled by Thomson Reuters had been expecting earnings of $0.07 per share.

Excluding the revenues paid to its advertising partners, Yahoo reported net revenue of $1.13 billion, just ahead of analysts' expectation of $1.12 billion.

Yahoo reported overall revenue of $1.58 billion for the quarter, a 12 percent drop from the year-earlier period, but a modest uptick from the second quarter of this year and ahead of the company's guidance.

The performance was enough for CEO Carol Bartz to declare that Yahoo is now on the upswing, with the worst of the downturn behind it.

"With revenue coming in above our guidance and flat sequentially, we had a solid third quarter that signals our major businesses have stabilized," Bartz said in a statement.

Later on a conference call with analysts, CFO Tom Morse echoed that sentiment.

"Overall the theme for third quarter was stabilization after we saw strengths in key areas of our business after two straight quarters of deceleration," he said.

Bartz was unable to make the call due to an illness that was described as non-serious.

Yahoo's report of a profitable quarter and signs of stabilization follow similar news from its larger rival Google (NASDAQ: GOOG), which last week reported its own strong third quarter and announced plans to hire more aggressively and ramp up its pace of acquisitions.

The milestones of Yahoo's third quarter suggest that it is headed on a different path.

In July, the company inked a major search partnership with Microsoft (NASDAQ: MSFT), which will see the software giant take over Yahoo's engineering platform, while Yahoo will be responsible for ad sales.

Yahoo remains a significant player in the search market, though its share has dipped below 20 percent, while Microsoft, despite modest gains after the release of its new Bing search engine, has yet to grab more than 10 percent of the market, according to online metrics firm comScore. Google, by contrast, has been inching toward 65 percent of the market.

Morse also challenged the notion that the Microsoft deal, which the companies expect to close early next year, means that Yahoo is giving up on search.

[cob:Special_Report]"Many people thought the announcement meant we were exiting search altogether, which isn't the case at all," he said. "The next revolution isn't with the algorithms that provide the results, it's about creating a better, more personally relevant experience."

Morse explained that Yahoo intends to continue to innovate on the consumer-experience side of the search sector, without getting caught up in the "arms race" between Microsoft and Google of investing in the technology platform.

"This is where we'll differentiate ourselves," he said.

In the meantime, Yahoo is focusing on building out its content and display advertising platform, an effort it is supporting with a major multinational re-branding campaign it launched in September.

Yahoo said that the campaign will reach every major region of the globe as it continues to expand internationally. In August, Yahoo announced a major push into the Arab world with the purchase of the online portal Maktoob.

The advertising campaign aims to highlight Yahoo's effort to personalize some of its most popular features, such as its home page and e-mail client, featuring taglines like, "The Internet is under new management: Yours."

"With new products like Yahoo home page, our brand revitalization campaign and expansion in the Middle East through Maktoob.com, our execution is improving and we're focused on what we do best -- being the center of people's online lives," Bartz said in her statement.

Yahoo is scheduled to hold its analyst day next week.

Update adds comments from call with analysts.