Yahoo profit grows

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- Yahoo posted higher second-quarter earnings Tuesday that topped Wall Street expectations, but sales missed estimates.

The company said its net income for the second quarter rose 51% from last year, to $213 million. Excluding restructuring charges in both periods, Yahoo earned 15 cents a share in the latest quarter, up from 10 cents a year earlier.

Analysts polled by Thomson Reuters, who typically exclude one-time charges from their estimates, expected earnings of 14 cents per share.

Sales for the Sunnyvale, Calif., company rose 2% to $1.6 billion. But excluding traffic acquisition costs -- the advertising costs shared with partners -- Yahoo had sales of $1.13 billion. That missed analysts' forecast of $1.16 billion.

Display advertising on Yahoo's owned and operated sites grew 19% compared with last year. But those gains were partially offset by an 8% drop in search advertising revenue.

Yahoo (YHOO, Fortune 500) shares fell more than 6.5% in after-hours trading.

A leaner Yahoo: Yahoo has focused on streamlining under the leadership of Carol Bartz, who replaced company co-founder Jerry Yang in January 2009. In addition to its search tool, Yahoo offers products such as e-mail and personal ads.

But Bartz has said her mission is to make Yahoo a more focused company in order to better compete with rivals. Last week, Google (GOOG, Fortune 500) reported quarterly profit that rose from its year-ago results but missed Wall Street forecasts.

Search was "sluggish" over the entire second quarter, Bartz said in a conference call. But Yahoo's ad revenues are up, Bartz said, adding that Yahoo is tapped into the local ad market.

Bartz also cited success of new ad space on the Yahoo log-in page, which rolled out in June. General Motors ads "performed quite well" for the Malibu, Traverse and Equinox vehicles, Bartz said.

"With us you're buying an audience, not a site," she added. "We're targeting, and we give everyone a unique experience."

More than words: "Users want to go beyond just words on a screen," Bartz said on the call. They want video, they want a social aspect and they want it very personally tailored to them."

On the social front, Yahoo in the second quarter "deepened its integration with Facebook" through Yahoo! Pulse, which lets users link the two accounts and share updates with friends across both networks. The company also acquired Koprol, an Indonesian location-based social network, as well as Associated Content Inc.

Yahoo also made several moves in the mobile realm. The company launched a mail and messaging system for the Android mobile operating system, as well as HTML mail and news sites for the Apple (AAPL, Fortune 500) iPhone. Games from social company Zynga will be available on Yahoo. To top of page

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