Yahoo's Second-Quarter Profit Falls 18 Percent

Firm Misses Targets, but Not as Badly as Investors Feared

Yahoo's second-quarter profit fell 18 percent, the latest sign of the financial decay that has frustrated shareholders and raised doubts about the Internet company's future.

But while the results released yesterday missed analyst expectations, the performance wasn't as bad as many investors had feared after Internet search and advertising leader Google's second-quarter earnings disappointed Wall Street last week.

Yahoo shares edged up 5 cents in extended trading after slipping 27 cents, to finish yesterday's regular session at $21.40.

The Sunnyvale, Calif., company earned $131 million, or 9 cents per share, from April through June, compared with $161 million, or 11 cents per share, in the corresponding period last year.

Analysts had projected earnings of 11 cents per share in the most recent quarter, according to Thomson Reuters.

Revenue totaled $1.8 billion, a 6 percent improvement from $1.7 billion in the corresponding period last year.

After subtracting commissions paid to Yahoo's advertising partners, revenue stood at $1.35 billion -- about $20 million below the average analyst estimate.

To the relief of investors, Yahoo didn't dramatically lower its revenue outlook for the remainder of the year despite the dreary economic conditions in the United States and part of Europe.

Management expects this year's revenue to range from $7.35 billion to $7.85 billion. That was not dramatically different from Yahoo's forecast of $7.2 billion to $8 billion three months ago.

Nevertheless, Yahoo's latest performance is likely to intensify the already tremendous pressure on management to lift the company's long-slumping stock price after rebuffing a $44.6 billion takeover offer from Microsoft in May.

With that bid off the table, Yahoo's market value is now about $18 billion below Microsoft's last offer.

Yahoo chief executive Jerry Yang gained a little more time to deliver on his turnaround promises by negotiating a truce on Monday with dissident shareholder Carl Icahn, who had been threatening to overthrow the company's board so that he could try to revive sales talks with Microsoft.

Icahn and two of his allies will join an expanded board of 11 directors.