Yahoo second-quarter profit misses Wall Street estimates

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Yahoo may have quelled the noisy distraction of the proxy fight with activist investor Carl Icahn this week, but it still must reassure investors that a turnaround of the struggling Internet company is underway.

Yahoo fell short of that goal today when it released second-quarter earnings that missed analysts’ already dampened estimates.

The lackluster performance underscored a weakening online advertising market and the company’s vulnerability in recent months as a takeover target. Analysts have said Yahoo was distracted during the quarter because of the turmoil caused by the takeover attempt by Microsoft, an internal reorganization and the departure of key employees and executives.

The financial performance may also undermine Yahoo’s campaign to convince Wall Street that it has what it takes to thrive as a standalone company with a strong position in Web search and display advertising.

Yahoo said net income fell to $131 million, or 9 cents a share, from $161 million, or 11 cents a share, a year ago. Analysts had expected 10 cents a share.

Revenue rose 6% to $1.8 billion, from $1.7 billion. Excluding payments to partner websites, revenue rose 8% to $1.35 billion, falling short of the $1.38 billion forecast by analysts.

In a press release, Chief Executive Jerry Yang said Yahoo had seen benefits from its strategic initiatives in the quarter. ‘We are seeing validation that we have the right strategy,’ he said.

The missed expectations today could resonate at next week’s shareholder meeting.

-- Jessica Guynn