Yahoo reports a weak quarter, but refuses to believe that its yearly financial plan is off course

It’s been a turbulent last year for Yahoo. Between the failed talks with Microsoft over a wholesale acquisition, the renewed interest by the company in buying only the search engine portion of Yahoo, and most recently the ceding of part of the board seats to Icahn and his group of insurgent investors, Yahoo has had plenty of distractions. These distractions have overshadowed to some extent the deep trouble the company continues to be in as it leaks profit and marketshare.

While Yahoo is still an internet giant and sees tremendous traffic, it has fallen on hard times. An advertising deal with Google and a major reorganization of its upper level management were not enough to entirely turn things around, as indicated by the metrics on the latest earning report.

In Q2 2008 Yahoo saw its net income fall from $161M USD in Q2 2007 to $131M USD this year, a drop of 19 percent. The gross revenue fared better rising 6 percent to $1.798B USD. However, even this one strong spot was the sign of some investor griping. The revenue from sites carrying Google ads amounted to $1.35B USD, an 8 percent rise. Investors were disappointed as they expected at least $1.37B USD.

Despite the bad news on the profits front, Yahoo Chief Financial Officer Blake Jorgensen refused to change its outlook for the coming quarters. This move was characteristic of the company which some label as stubborn and others label as determined. Mr. Jorgensen alluded to the revenue rise, stating, "We are pretty pleased (with results), relative to both the distractions and the economy."

Jeffrey Lindsay, analyst at Sanford C. Bernstein is not optimistic on Yahoo, but says that at least it doesn't have to worry about exceptionally high expectations. He states, "Investors braced for the worst ...These results are poor, but relative to what people were expecting, they're not so bad."

Yahoo did indicate that it has not ruled out looking at a sale to Microsoft as a means of alleviating its struggles. Yahoo Chief Executive Officer Jerry Yang stated in a conference call, "We have looked at just about every alternative you could imagine as far as looking at how do we best position the company to go forward either through transactions and/or financial options."

"It looks like the iPhone 4 might be their Vista, and I'm okay with that." -- Microsoft COO Kevin Turner

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