Yahoo faces challenges

Web giant logs little growth

Reinforcing the notion that Terry Semel left amid grim prospects for Yahoo, the online media giant reported disappointing earnings Tuesday that sent its stock down 4% in after-hours trading.

While second-quarter performance was in line with guidance, Yahoo slightly lowered its guidance for the rest of the year, disappointing investors looking for faster growth.

In the second quarter, revenue was up 8% from the same quarter a year ago to $1.698 billion, while higher costs drove down net income 2% to $161 million.

Guidance now calls for Yahoo to generate revenue of $4.89 billion-$5.19 billion this year, excluding what it pays to publisher partners. Previous guidance had been $4.95 billion-$5.45 billion. Last year, it was $4.56 billion.

In an unusually candid conference call that showed how serious Yahoo’s problems are in Wall Street’s eyes, new CEO Jerry Yang admitted that the Netco is facing numerous serious challenges.

“There is a significant gap between where Yahoo is and where it needs to be given the competitive environment,” Yang said.

He and prexy Susan Decker outlined various challenges the company faces, including boosting its flagging display advertising business, motivating discouraged employees and better aligning the company’s resources.

Decker even listed several mistakes the company has made, including not integrating search advertising company Overture after Yahoo bought it. That led to delays in rolling out the new advertising system called Panama and allowed Google to establish a commanding lead in search marketing.

Exec added that Yahoo had been “risk averse to making personnel decisions,” a veiled reference to the departure of key execs in the past year who didn’t succeed, including former entertainment topper Lloyd Braun. She also granted that Yahoo has not been driven enough in the display advertising business, where growth has been slowing.

Shares in Yahoo rose 3% to $27.53 Tuesday before earnings were announced.

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