July 23 (Bloomberg) -- Yahoo! Inc. Chief Executive Officer Jerry Yang, who has rejected takeover bids worth as much as $47.5 billion, defended his tenure at the Internet company, saying he's on the path to a turnaround.

``I've got a lot of fire -- I intend to lead this company,'' Yang said yesterday in an interview. ``We're just getting started. We've made some significant progress.''

Yang, 39, is stepping up spending on advertising technology, part of a plan to reach revenue of $8.8 billion in 2010, a 72 percent increase from last year. Criticized by billionaire investor Carl Icahn for lacking operational expertise, the CEO is trying to prove he can spur growth while remaining independent.

For now, the plan is weighing on profit, which decreased 18 percent in the second quarter, Yahoo reported yesterday. Earnings have fallen in nine of Yahoo's last 10 quarters. Revenue climbed 8.2 percent to $1.35 billion in the latest period, leaving out fees passed on to partner sites.

``At least Yahoo is not further imploding,'' Sandeep Aggarwal, an analyst at Collins Stewart in San Francisco, said in an interview with Bloomberg Television. He has a hold rating on Yahoo shares. ``Certainly these investments have been made with the expectation that they will pay off.''

Yahoo, based in Sunnyvale, California, fell $1.01, or 4.7 percent, to $20.39 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has dropped 12 percent this year.

Icahn's Fight

Icahn, prompted by Yahoo's rejection of a Microsoft Corp. bid in May, led a two-month campaign to unseat the company's directors. He ended the fight this week after Yahoo offered board seats to him and two candidates he endorses.

The company is examining ways to increase its value to shareholders, Yang said. That may include the sale of stakes in Yahoo's Asian assets or the pursuit of its own acquisitions, he said. Icahn had urged Yahoo to make a deal with Microsoft.

Yahoo, which makes most of its revenue from Internet advertising, also forged an ad partnership with Google Inc. The deal, under regulatory review, would generate as much as $450 million in annual sales, Yahoo says.

``We're still on track to grow profits in 2009 and 2010,'' Yang said. ``We think the investments we're making now will start paying off.''

Yahoo is testing an automated ad system with two newspapers, the San Francisco Chronicle and the San Jose Mercury News, the results of which have been ``very encouraging,'' Yang said. More customers will start using the software this quarter, Yahoo President Susan Decker said yesterday on a conference call.

Meeting Goals

While an economic slowdown hurt some customers' advertising budgets, partnerships with clients such as Wal-Mart Stores Inc. helped Yahoo meet its own targets, Chief Financial Officer Blake Jorgensen said.

Sales of banner ads and so-called display promotions on Web pages will rise 12 percent in the U.S. this year, Magna Global said this month. The New York-based research firm lowered its forecast from a 17 percent gain, as soaring fuel and food prices curbed spending.

``The economic environment isn't showing any signs of improving,'' said Sanford C. Bernstein & Co. analyst Jeffrey Lindsay. The New York-based analyst expects Yahoo shares to perform in line with the market. ``They've got the largest exposure to the display ad market, which is the weakest.''

Google, based in Mountain View, California, makes more of its revenue from search ads, the text promotions that appear next to query results. Google accounts for most Internet searches.

Internal Pressure?

Before Icahn's detente with Yahoo, he had sought to replace Yang, who he said was better suited as a ``technical'' leader. The investor has helped hasten the departures of executives at companies such as Blockbuster Inc. and Motorola Inc.

With Icahn as a director, Yang may face more internal pressure to reignite the company's growth or sell to Microsoft. Yahoo had argued that the Redmond, Washington-based software company's offer didn't reflect its value and growth prospects.

Microsoft offered $44.6 billion, or $31 a share, for Yahoo six months ago. The software maker sweetened the bid to $33 a share before walking away from talks after Yang sought more money. Since turning down those offers, Yahoo has spurned multiple proposals from Microsoft to buy its search unit.

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net

Last Updated: July 23, 2008 16:19 EDT