July 17, 2007 / 8:39 PM / 12 years ago

Yahoo posts drop in profit; gives weak forecast

SAN FRANCISCO (Reuters) - Internet media company Yahoo Inc. YHOO.O on Tuesday reported a dip in quarterly profit, weighed down by weak display advertising, and gave a weaker-than-expected forecast through the end of 2007.

Yahoo's headquarters are seen in an undated publicity photo. Internet media company Yahoo Inc. on Tuesday reported a dip in quarterly profit in line with previously lowered expectations, weighed down by weak brand advertising and recent management turmoil. REUTERS/Handout

Shares in Yahoo fell more than 3 percent in extended trade as investors remain skeptical as they wait to gauge the company’s strategy under a newly revamped management team.

“Push is coming to shove at Yahoo,” said RBC Capital Markets analyst Jordan Rohan. “We can see why (former Chief Executive) Terry Semel volunteered to exit stage left. It’s a mess.”

Net income for the second quarter fell to $161 million, or 11 cents per diluted share, from the year-earlier quarter’s $164 million, or 11 cents per diluted share. The earnings were in line with the company’s previously lowered forecast and Wall Street’s adjusted expectations.

Earnings excluding one-time items and stock options expenses were $238 million, or 17 cents per share, compared with $241 million, or 16 cents per share, a year ago.

Gross revenue rose 8 percent to $1.70 billion. Excluding the cost of payments to advertising partners, revenue rose 11 percent to $1.24 billion.

Analysts had predicted revenue, excluding advertising affiliate payments, or so-called traffic acquisition costs (TAC), of $1.243 billion, on average, according to Reuters Estimates forecasts ranging from $1.20 billion to $1.29 billion.

Yahoo has disappointed investors in five of the last six quarters and seen its share price drop roughly 30 percent since the start of 2006.

The company had warned in mid-June that slower growth in online display advertising used by corporate brand advertisers would offset somewhat better results from its recently upgraded search ad business, known as Project Panama.

At the same time, Yahoo replaced Semel as CEO with Jerry Yang, who co-founded Yahoo 12 years ago.

Yahoo forecast revenue excluding payments to advertising affiliates of $1.17 billion to $1.31 billion for the third quarter and $4.89 billion to $5.19 billion for the full year. Yahoo had previously expected such revenue to total $4.95 billion to $5.45 billion for the year.

The outlook was also slightly below the range of analysts forecasts of $1.24 billion to $1.39 billion for the third quarter and $4.99 billion to $5.40 billion for the year.

Yahoo shares had closed up 3.1 percent at $27.53 in regular-session trading on Nasdaq. Following the report, the stock fell 2.8 percent to $26.76.

Additional reporting by Michele Gershberg in New York

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