Yahoo Investors Lose Enthusiasm

Yahoo shares gave back early gains Tuesday, as investors wondered if the company’s new leadership can reverse its market share losses or even lead to a blockbuster merger or partnership.

Yahoo shares opened at their highs Tuesday morning and spent the rest of the day on the defensive, giving back all of the stock’s overnight gains and even some of Monday’s gains, when rumors of the changes first began to circulate.

Yahoo’s shares are little changed since August 2004, the month search rival Google went public. Google’s shares have gained more than 400% since then. Financial results tell much the same story: Yahoo’s revenue after traffic acquisition costs rose 68% in 2005-2006, a period in which Google grew sales 371%. Google now commands nearly half the U.S. search market, while Yahoo remains stalled at about 27%, according to comScore.

Analysts were generally positive about the return of Jerry Yang as CEO, noting the effect that Steve Jobs’ return to Apple and Michael Dell to Dell have had on those companies. But they noted that the company faces significant headwinds. They also lowered estimates after Yahoo said it expects lower sales because of weakness in graphical display advertising, but the company noted strength in its new search ad platform.

Stocks posted modest gains Tuesday on unchanged oil prices and falling bond yields, but disappointing results from Best Buy weighed on stocks.

Expedia jumped 14% on a massive $3.5 billion share buyback.

ESS Technology rose on possible liquidation of the company.

Color Kinetics gained on a buyout deal with Philips .

Microchip fell 9% on a warning.

The Nasdaq added a fraction to 2626, the S&P 500 tacked on 2 to 1533, and the Dow rose 22 to 13,635. Volume rose to 2.82 billion shares on the NYSE, and 1.94 billion on the Nasdaq. Advancing issues led by a 18-13 margin on the NYSE, and 16-14 on the Nasdaq. Upside volume was 56% on the NYSE, and 45% on the Nasdaq. New highs-new lows were 202-46 on the NYSE, and 150-55 on the Nasdaq.

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