Yahoo Q3 earnings slip again

Net income fell in the third quarter for Yahoo Inc., as the Internet company continues to face competitive challenges.

Net income for the period, ended Sept. 30, was US$151 million or $0.11 per share, compared to $159 million or $0.11 per share for the corresponding quarter in 2006.

The report is slightly better than the consensus from Thomson First Call, which expected $0.08 per share using a comparable accounting method.

Revenue was $1.76 billion, up 12% over the $1.58 billion reported in the third quarter last year.

Operating income for the quarter was $150 million, down 26% compared to the same period in 2006.

Yahoo said that it is on track to improve its performance, based on a recently executed review of its business and investments designed to grow its communities of users, advertisers and publishers.

Earlier this year, Yahoo's CEO stepped down amid criticisms that the company was failing to take advantage of the boom in Internet advertising. Company co-founder Jerry Yang took his place, vowing to analyze the business and turn it around.

He said to expect to see some more Yahoo services, like the recently discontinued Yahoo podcast service, disappear. Weeding out services that aren't paying off is part of a move to identify and support services that consumers use every day. Yahoo Mail, Finance, Sports and News have proved to be high-quality sites, but other services haven't, so they'll either loose additional funding or be cut altogether, Yang said.

In addition to cutting the podcast service, other indications of this trend include Yahoo's recent move to de-emphasize subscription music services in favor of ad-supported music services and the migration to Flickr from Yahoo's homegrown photo service, he said.

Yahoo will also be adding new services, however. With the recent acquisition of Zimbra, Yahoo plans to address a new market by offering Web-based mail services for universities, small businesses and ISPs, said Sue Decker, president of Yahoo.

Yahoo also plans to better support third-party developers by opening up its platform. In addition to increasingly using open APIs, Yahoo will open its Web pages for third parties to develop on and offer access to data so applications can integrate with Yahoo, Yang said.

"Our goal is to create a motivated group of developers," Yang said. "While we're early in the pursuit of this objective, we'll invest in this to become the leading platform choice for Web developers."

Yahoo is also working to improve the services it offers to advertisers. It has nearly completed the global rollout of Panama, faster than expected, Decker said. Panama is Yahoo's new search advertising platform, which the company hopes will boost its pay-per-click advertising business.

The executives seemed cautiously optimistic about the business changes and opportunities for turning around company performance. "We have a lot more work to do, but we're generally excited about where the company is headed," Yang said.

The executives did not mention a request that the House Foreign Affairs Committee made on Wednesday to Yahoo. The committee asked Yang and a Yahoo attorney to testify at a hearing in November to explain Yahoos actions in China that led to the arrest and imprisonment of a Chinese journalist there. The committee wants the attorney to explain earlier statements in which he said Yahoo didnt know why the Chinese government was investigating the dissident when the company turned over information about him to the government. The committee says it has evidence that Yahoo did know about the nature of the investigation.

Copyright © 2007 IDG Communications, Inc.

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