Yahoo! Manages an Upside Surprise, For Now

In founder Jerry Yang’s first quarter as CEO, Yahoo! managed to surprise investors on the upside, sending its stock up 9% so far in early after-hours trading. That followed a 4% drop before third-quarter earnings were announced. On the surface, they weren’t much to look at: Net income was down 5% on a 12% rise in sales, to $1.8 billion. But it was better than analysts had expected. But Yahoo still faces many challenges. And reaction could shift shortly as the conference call begins. More to come….

Update: Jerry Yang’s opening statement is just that, pretty boilerplate to my ears. But one thing that came through is a vow to play in the entire $45 billion online advertising market, not just a “subset,” as he put it. I read into that no intention to, say, offload search ads to Google, as some have suggested. Despite that, Yang said there will be more “one-off services” around the world that will be cut off, as Yahoo did in folding Yahoo Photos into Flickr, shutting down Yahoo Podcasts, and deemphasizing subscription-based music services in favor of ad-supported music.

(Silicon Alley Insider is liveblogging the call, if you want more detail.)

More from President Sue Decker: Didn’t catch all the numbers, but it appears Panama, the crucial and once much-delayed search ad system, is beginning to work. Revenue per search was up 20%. And display ad revenue was also up 20%, the first acceleration after five quarters of deceleration.

After-hours jump in the shares seems to be holding up….

One response to a question sticks out. An analyst asked if Yahoo needs to do a big social-networking deal to get the page views sites such as Facebook are getting. Yang didn’t answer directly, but said Yahoo is more focused on becoming the first stop for most people online, and would try to facilitate connections between people only as it supports that starting-point strategy. Given that social networks such as Facebook are increasingly the starting point for many people online, as well as Yahoo’s previous emphasis on connecting users with other people and their passions, I’m a little puzzled by the seeming lack of emphasis on social networking in what Yang said. Maybe he was just responding to the implicit question: Are you gonna buy a piece of Facebook? But even if so, it wasn’t exactly a ringing endorsement of the current obsession on the Web.

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