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Yahoo Second-Quarter Profit Rises 11% Amid Lower Expenses

The company's revenue came in weaker than expected, but reduced operating expenses helped boost the bottom line as CEO Carol Bartz declined to comment on Yahoo's interest in online video site Hulu.

NEW YORK - Online giant Yahoo on Tuesday reported an 11 percent gain in its second-quarter profit to $237 million thanks to lower operating expenses.

On an earnings conference call, Yahoo CEO Carol Bartz said the latest financials were a mix of the good, the encouraging and the unsatisfactory. She declined to comment on Yahoo's interest in acquiring online video site Hulu. "But thanks for asking," she quipped in response to an analyst question.

The online firm helped kick off the sales process for Hulu after approaching it about a possible acquisition. Besides Yahoo, possible Hulu suitors include the likes of satellite TV firm DirecTV, AT&T and Google. Bloomberg News reported Tuesday that Microsoft told Hulu last week that it wouldn’t continue pursuing a bid.

Yahoo's second-quarter earnings of $237 million were better than the year-ago figure of $213 million and were slightly ahead of Wall Street estimates.

Revenue at Yahoo dropped 23 percent to $1.23 billion. Excluding traffic acquisition costs, revenue of $1.08 billion was down 5 percent - slightly below Street estimates. Excluding the revenue share related to a search agreement with Microsoft and other items, this figure would have risen 1 percent, the firm said.

Display advertising revenue for Yahoo was an area that was a key drag. The figure was "disappointing," Stifel, Nicolaus analyst Jordan Rohan said. Bartz on the call explained that a reorganization of the Yahoo sales team led to more staff departures than expected, which hurt display sales. Management signaled the weakness would continue in the current quarter, but argued that things will eventually improve.

"We made clear progress in search, and saw strong growth in engagement on our media properties," said Bartz, who has been under pressure to show clear signs of a turnaround at the company, in an earnings statement. But she added: "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."

 

 

On Tuesday's call, she also said that negotiations with Chinese Internet group Alibaba continue in a dispute over the transfer of online payment arm Alipay to a firm controlled by Alibaba's CEO.

 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai