Internet search engine Yahoo! Inc. (YHOO), said Tuesday its profit for the second quarter grew 11 percent over last year, helped by lower expenses. Nevertheless, Yahoo's quarterly revenue fell 23 percent due to the change in revenue presentation related to the search agreement with Microsoft. Looking ahead, the company provided its revenue outlook for the third quarter, which is indicated to come in below current Street expectations.
The Sunnyvale, California-based company reported net earnings of $237 million or $0.18 per share for the second quarter, up from $213 million or $0.15 per share in the prior year quarter.
Excluding certain items, adjusted net income grew to $243.5 million or $0.19 per share from $220.0 million or $0.16 per share in the year-ago quarter.
On average, 28 analysts polled by Thomson Reuters expected the company to report earnings of $0.18 per share for the second quarter. Analysts' estimate typically exclude special items.
Income from operations for the quarter rose 9 percent to $191 million from $175 million in the previous year quarter.
Second quarter revenue declined 23 percent to $1.23 billion from $1.60 billion last year, due to the required change in revenue presentation related to the search agreement and the associated revenue share with Microsoft (MSFT).
Excluding the impact of the two items, as well as the impact of the HotJobs divestiture and other items, revenue decreased 9 percent for the quarter.
Revenue, excluding traffic acquisition costs, or revenue ex-TAC dropped 5 percent to $1.08 billion from $1.13 billion in the year-ago quarter, due to the revenue share related to the search agreement with Microsoft. Excluding this and other special items, revenue ex-TAC increased 1 percent year over year. Twenty-eight analysts had a consensus revenue estimate of $1.11 billion for the second quarter.
Display revenue grew 2 percent to $524 million from $514 million, while search revenue soared 45 percent to $467 million from the second quarter of 2010.
Carol Bartz, CEO of Yahoo, said, "We experienced softness in display revenue in the second half of the quarter due to comprehensive changes we have made in our sales organization to position ourselves for more rapid display growth in the future."
Revenue from Americas fell 29 percent to $808.0 million, and revenue from Asia Pacific declined 21 percent to $258.4 million from the previous year. However, EMEA revenue grew 16 percent to $162.6 million for the second quarter of 2011.
Total operating expenses for the second quarter dropped to $667.0 million from $743.3 million in the prior year quarter.
According to data published by Internet data tracking firm comScore Inc. (SCOR), Google (GOOG) sites continued to lead the U.S. explicit core search market in June with 65.5 percent of search queries conducted, followed by Yahoo sites with 15.9 percent and Microsoft sites with 14.4 percent.
For the third quarter of 2011, Yahoo anticipates GAAP revenue of $1.200 billion to $1.260 billion, and revenue ex-TAC of $1.050 billion to $1.100 billion. The Street currently expects revenue of $1.12 billion for the quarter.
During the quarter, Yahoo acquired 5to1 Holding Corp. (FTOH.OB), an online advertising alliance consisting of media publishers, which is expected to expand its partnership with publishers and boost its sales of premium online ads.
Yahoo also acquired IntoNow, which has built a platform and companion TV application based on real time indexing of television.
Yahoo's larger rival, Google Inc., said Thursday its profit for the second quarter increased 36 percent over last year, as it continued to draw more advertising revenues. Google's earnings and revenues for the quarter came in well ahead of the Street expectations.
Yahoo closed Tuesday's regular trading at $14.59, up 17 cents or 1.18% on a volume of 29.81 million shares. However, in after-hours, the share lost 27 cents or 1.85%.
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