INSTANT VIEW: Yahoo quarter seen better than feared

SAN FRANCISCO (Reuters) - Yahoo Inc on Tuesday posted a nearly 19 percent fall in net profit, and net revenue short of lowered Wall Street expectations, as it faced a weakening economy and the distraction of Microsoft Corp's pursuit.

But adjusted profit was in line with Wall Street targets and shares of the hard-hit stock rose slightly in after-hours trade to $21.53 from a close of $21.40 on Nasdaq.

COMMENTARY:

JEFFREY LINDSAY, ANALYST, SANFORD C. BERNSTEIN

"The strange thing is it's obviously a miss, significantly less on net revenue than what the Street was looking for ... However the stock hasn't plummeted. Clearly, it's telling us that these results are poor, but relative to what people were expecting, they're not so bad.

"Investors braced for the worst.

"The big story seems to be quite a big drop in the U.S.-based business and particularly the affiliate sites. The fees business has gone down as expected.

"People had hoped Yahoo's strong partners, like EBay's, might actually have helped it out. It's gone the other way."

YOUSSEF SQUALI, ANALYST JEFFERIES & COMPANY (VIA EMAIL)

"Inline with our reduced expectations. Nothing terrible but nothing great either. It'll have a neutral effect on their position vis a vis Icahn and MSFT, we believe"

MARTIN PYYKKONEN, ANALYST, GLOBAL CROWN CAPITAL

"The revenue number wasn't an outright disaster. It was by no means a great quarter. There's no reason for Yahoo to justify a price above what Microsoft was willing to pay before.

"Considering all the distractions and all the things going on, it wasn't a total disaster.

"They're not gaining any market share relative to Google, but nobody expected them to be gaining share ... They're not totally bleeding to death."

(Regarding revenue outlook) "Considering what's going on in the economy, they're not going to go out on a limb...They're tightening the range a bit."

SANDEEP AGGARWAL, ANALYST, COLLINS STEWART

"It's a modest miss quarter. The top line, EBITDA and EPS all came below Street expectations. People were expecting worse than this.

ROSS SANDLER, ANALYST, RBC CAPITAL MARKETS

"It's better than everybody's worst fears, but we're going to have wait for the conference call before we can figure out exactly what's going on here. The expectation was that this would be a disaster, but this is better than that expectation.

"With the guidance they've basically maintained the midpoint of the range. (But) while at first glance, it looks like they are maintaining guidance, it's ex a couple of items that some might view as ongoing operations."

RYAN JACOB, PORTFOLIO MANAGER, JACOB INTERNET FUND

"The results, I would say, were relatively mediocre. Given concerns about a slowdown in the display ad market, expectations were very low. We think for the rest of the year it may be difficult to reach the latest guidance. We still believe that some sort of outsourcing deal with Microsoft probably would be beneficial in realizing value for the overall business. That's been our take, and this quarter reinforces that."

COLIN GILLIS, ANALYST, CANACCORD ADAMS

"These were lackluster, nothing special. Given how critical this quarter was, there nothing that makes us jump up and say Yahoo.

"It looks like they tightened the (forecast) range. Given the U.S. environment, they sort of set themselves up at the lower end of the range. They didn't make any radical change, but it's going to be a stretch for them to exceed the numbers."

(Reporting by Ken Li, Paul Thomasch, Cal Mankowski and Kristina Cooke, editing by Peter Henderson),