Yahoo (YHOO) Second-Quarter Earnings Fall Short

Most people had expected Yahoo to pull out all the stops to make its second quarter, but if it did, the pulling didn’t work. In its just-released report, Yahoo said its net profit fell 19% to $131 million, or 9 cents a share, from $161 million, or 11 cents a share, a year ago. That’s a penny shy of what analysts had forecast. Net revenue, excluding payments made to partner Web sites for traffic, rose 8%, to $1.35 billion. That’s just short of analysts’ expectations of $1.38 billion, though results were within the range guidance Yahoo gave last April.

The fact that Yahoo didn’t fall even shorter might seem to be cause for optimism, given economic challenges that caused even Google’s earnings to fall short of hopes last week, coupled with Microsoft’s and Carl Icahn’s withering assault on Yahoo’s independence. But investors don’t look happy. Even after Yahoo’s stock fell today by 1.4%, to $21.40 a share, shares are down another 1% or so in extended trading.

UPDATE: Shares are now up about 1%, so it looks like investors realized it could have been worse, or were encouraged that Yahoo didn’t lower its outlook. But reaction will jump around a bit until it’s clearer precisely what the numbers are saying.

In any case, I’m doubtful the results are poor enough to send shareholders to Yahoo’s Aug. 1 annual meeting with torches and pitchforks. Following yesterday’s announced settlement deal with Icahn to give him three seats on Yahoo’s board, it appears that Yahoo’s current board has the support of a majority of shareholders, unhappy as they may be with Yahoo’s performance or its inability to get a stock-boosting deal done with Microsoft.

I hope to add more color from the analysts conference call, since Yahoo didn’t shed much light on the apparent shortfall. “Yahoo! saw benefits in the second quarter from a number of the strategic initiatives that we have been delivering against, including the roll out of innovations in search and the announcement of a number of important partnerships,” cofounder and CEO Jerry Yang said in a statement.

In other news, Yahoo’s executive exodus continued today with the departure of Chad Dickerson, who headed Yahoo’s Brickhouse special-projects group and who was a key liaison with software developers. He’s joining Etsy, a Web marketplace for handmade goods, as CTO. (On the conference call, Yang says Yahoo continues to hire managers from outside, including someone to run Yahoo’s cloud computing efforts in the next few days.)

UPDATE with further tidbits from the conference call (Silicon Alley Insider is liveblogging in somewhat more detail):

President Sue Decker says U.S. search revenue was up 19% on Yahoo sites, though revenue per search was down in the U.S.

Generally, Yahoo’s seeing few economy-related problems outside the U.S. Display-ad revenue grew in the double digits worldwide.

Employee count is up 500 from a year ago, to 14,300. I assume that includes the layoffs, so a good portion of the increase may be acquisitions.

From answers to analysts’ questions:

Decker mentions that the U.S. display-ad business grew in the mid-single-digits, hurt most by premium ad inventory but helped by remnant inventory from Right Media. “We are seeing some price pressure,” she says.

No firm word on the talk that Yahoo could sell its Asian Internet properties as a way to unlock some value from the beaten-down stock. CFO Blake Jorgensen says Yahoo wants to continue benefiting from growth in that region, so this doesn’t sound imminent.

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