Yahoo misses estimates - sales up, profits down
Internet search giant reports second-quarter earnings of 10 cents per share. Sales grew 8% versus last year.
NEW YORK (CNNMoney.com) -- Internet search engine Yahoo Inc. reported second-quarter results Tuesday that fell short of Wall Street's expectations as the company struggles with dwindling market share and softening economic conditions.
The Sunnyvale, Calif.-based company said quarterly net income fell 18% to $131 million, or 9 cents per share, from $161 million, or 11 cents per share, a year ago.
Excluding certain charges, Yahoo said it earned 10 cents per share. Analysts surveyed by Thomson Reuters, who normally exclude one-time charges from their forecasts, were expecting 11 cents per share for the quarter.
Sales rose 6% to $1.79 billion from $1.69 billion a year ago. Stripping out certain revenue costs, Yahoo reported that sales climbed 8% to $1.35 billion in the quarter from $1.24 billion last year. Analysts were expecting $1.37 billion.
"It was a mixed quarter," said Sandeep Aggarwal, an analyst at investment banking group Collins Stewart. "But that was kind of expected given the economic headwinds."
The results come a day after Yahoo said activist investor Carl Icahn, who has argued that the company should sell itself to software maker Microsoft (MSFT, Fortune 500), will join the its board of directors in a deal to avoid a proxy battle. The board will also add two additional members chosen from a list of candidates prepared by Icahn.
Jerry Yang, Yahoo chief executive and co-founder, said he was pleased with the resolution reached with Icahn. The decision "eliminates distractions," he told analysts in a conference call following the results.
"We look forward to working with the new board members who will be joining us," he added.
Yang also said the company added 500 employees in the second quarter.
Yahoo (YHOO, Fortune 500) recently confirmed that it has entered a tentative deal to outsource part of its search business to rival search engine Google (GOOG, Fortune 500).
"Our commercial agreement with Google is another great example of our open strategy and we expect it will strengthen our competitive position as a leading provider of search and display advertising," said Sue Decker, Yahoo's president, in a statement.
But the deal with Google requires approval by the U.S. Department of Justice. The company said it hopes to implement the partnership, if approved, sometime in the fourth quarter.
Despite the economic storm clouds the company did not lower its full year revenue guidance. It did, however, tighten the range of its estimates.
Looking ahead, Blake Jorgensen, Yahoo's CFO, said he expects full year revenue in the range of $7.35 billion to $7.85 billion, as measured by generally accepted accounting principles.
Yahoo had forecast full year revenue of $7.2 billion to $8 billion when it reported earnings three months ago.
For the third quarter of this year, Yahoo is expecting GAAP revenue in the range of $1.78 billion to $1.98 billion.
Aggarwal thinks the fact that Yahoo did not lower its guidance was an encouraging sign, though he said the results overall were "kind of a non-event." 
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