Yahoo Posts Profit As Revenue Lags

The company hopes to improve its revenue from Internet search through a deal with Microsoft.
Yahoo swung to a profit in the fourth quarter, as the Internet company managed to slow its revenue slide.

Yahoo on Tuesday reported net income of $153 million, or 11 cents a share, compared to a loss of $303 million, or 22 cents a share, the same period a year ago. In the fourth quarter of 2008, Yahoo had taken $500 million in writedowns and charges related to layoffs and its international business.

Revenue in the fourth quarter was $1.7 billion, down 4% from $1.8 billion a year ago. However, the drop was an improvement over the third quarter, when revenue was down 12% year to year.

Yahoo Chief Executive Carol Bartz, who was hired as CEO a year ago, said the revenue improvement was due to better demand for display advertising and the first sequential increase in search advertising revenue since the third quarter of 2008.

"Our business has positive momentum and we feel good as we head into 2010," Bartz said in a statement.

Yahoo's better revenue picture comes as the online advertising market in general is forecast to improve after seeing its first drop in seven years in 2009, according to eMarketer. This year, the market is expected to post a 5.5% increase.

Yahoo in the fourth quarter reported a 15% decline in search advertising and a 1% drop in banner adertising. The company hopes to improve it revenue from Internet search through a deal with Microsoft. Under the agreement, which awaits regulatory approval, Yahoo would get a cut of search advertising sold on its site using Microsoft technology. Yahoo plans to also continue selling its own search advertising.

The Microsoft deal comes as Yahoo is loosing share to Microsoft's Bing search engine. Yahoo's share of total U.S. Internet searches in December fell to 17.3% from 17.5% in November, while Microsoft's share rose by 0.4 of a percent to 10.7%, according to ComScore.

Both companies, however, are far behind market leader Google, which accounted for 65.7% of Internet searches in the U.S. in December, according to ComScore. Google, which draws must of its ad revenue from Internet search, reported last week a 17% increase in revenue in the fourth quarter of 2009.

Yahoo, online advertising, search advertising, search engines, banner ads, Microsoft, Google, Internet companies, earnings, net income, profits, revenue, Carol Bartz, advertising market