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NEW YORK (CNNMoney) -- Yahoo reported second-quarter earnings that met Wall Street estimates, but weakness in display and search revenue sent shares lower in after-hours trading.
Net earnings came in at 18 cents per share, excluding one-time costs, which matched analysts' estimates as polled by Thomson Reuters.
Excluding traffic acquisition costs -- revenue shared with partners -- Yahoo had sales of $1.08 billion, just below estimates of $1.1 billion. That was a 5% decline from the second quarter of 2010.
Yahoo (YHOO, Fortune 500) attributed the decline to the sizeable chunk of its sales that it hands over to Microsoft (MSFT, Fortune 500) -- whose Bing technology underpins Yahoo's search site. As part of that deal, Yahoo hands over 12% of its search advertising revenue to Microsoft.
Shares fell almost 4% in after-hours trading immediately following the report, but they recovered to about a 2% decline later in the evening.
Display ad revenue rose 5% to $467 million, which was less than had been expected. On a conference call after the release, Yahoo CEO Carol Bartz addressed the lackluster figure.
"Display did not perform the way that we expected. Obviously I am not happy,"
Bartz said.
She attributed the display sector decline to changes in sales organization, which included leadership changes as well as some people leaving the company.
"We did not have enough salespeople in front of the big clients," she said.
Display advertising was once Yahoo's biggest stronghold, but it's now facing sharp competition from rivals Google (GOOG, Fortune 500) and Facebook.
Search revenue was even weaker, falling 15% over the year to $371 million.
Yahoo has had a tough 2011 so far. At the annual shareholder day last month, stockholders slammed the company not only for its slumping stock price, but also for weakness in its display ad market share and the difficulties it's having with Chinese company Alibaba.
Yahoo forecast that it will bring in third-quarter revenue between $1.05 billion and $1.1 billion, excluding the traffic acquisition costs. Analysts were expecting a forecast of $1.12 billion. Yahoo expects to pay Microsoft $35 million in revenue in the third quarter as part of the Bing search deal.
The company had $3.26 million in cash on hand as of June 30. Yahoo noted that it repurchased 30 million shares for $472 million during the second quarter. 
