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Yahoo Earnings Top Estimates

Yahoo Inc released its first-quarter results Wednesday, posting higher-than-expected earnings while warning that a key partnership with Microsoft is taking longer to pay off than the company had hoped.  The mixed results come two years in CEO Carol Bartz's tenure, amid shrinking expectations for the iconic web portal.

Analysts say the results indicate growth in Yahoo's business, both from an earnings perspective and in terms of margins.  But Yahoo's search business is a cause for concern, as that segment's revenue fell 19 percent in the first quarter from the same period a year ago.  A spokesman for Yahoo said on Tuesday the company will delay plans to utilize Microsoft search technology in some markets, as Microsoft needs more time to develop the technology.

In a conference call, Bartz said that the portal's per search revenue won't hit pre-Microsoft levels until at least the end of the year, revising an earlier forecast that it would pick up in the middle of the year.  Bartz explained that she was confident in Microsoft's plans to address Yahoo's issues, noting that under the deal between the two tech giants, Microsoft will reimburse Yahoo for lost revenue from its search business through the end of March, 2012.

As for its forecast, Yahoo said it expects to earn between $1.08 billion and $1.13 billion in the second quarter, a range that matches expectations of analysts, whose consensus estimate on second-quarter projected earnings was $1.1 billion.  The company posted first-quarter earnings of $223 million, or 17 cents per share, slightly surpassing analysts' expectations but well below the $310 million, or 22 cents per share, it earned in the first quarter a year ago.

Excluding charges related to Yahoo's Japanese investments, Yahoo earned 19 cents a share, easily beating analysts' consensus estimate of 16 cents in a recent Thomson Reuters survey.  Yahoo's net revenue, which excludes fees paid to Yahoo's partner websites, was $1.064 billion, beating analysts' expectations of $1.055 billion but down from its $1.13 billion in net revenue a year ago.