Yahoo revs up, profit down

Third quarter fuels stock surge

Low expectations following more than a year of bad news worked in Yahoo’s favor Tuesday, as the Netco’s stock surged 9% in after-hours trading after it announced a slight drop in third-quarter earnings.

The online media giant reported a 5% drop in net income to $151 million on $1.77 billion in revenue, up 12% from the same quarter a year ago. Yahoo did best with ad sales on its own websites, which surged 24% to $922 million. Revenue from ad sales on affiliate sites were down 1% to $622 million. Revenue from user fees was up 7% to $224 million.

Yahoo is in the midst of a significant revamp after former topper Terry Semel ankled in the spring under intense pressure from unhappy shareholders. Co-founder Jerry Yang took over as CEO and is running the company with prexy Sue Decker.

In a statement, Yang said Yahoo is “focused on three big, multiyear objectives: to become the starting point for the most consumers on the Internet; to be the ‘must buy’ for the most advertisers; and to deliver open, industry-leading platforms that attract the most developers.”

Though it remains a market leader in many categories, from movies to sports to mail, Yahoo has been far behind Google in search and ad-revenue growth and has had trouble capitalizing on new opportunities, such as video and social networking.

Its Santa Monica office, from which all media-related sites, such as those for movies, TV and sports, are run, remains a big question mark in the ongoing reorg. Former topper Lloyd Braun left late last year, and Vince Broady, who oversees it, recently said the office is reorganizing but didn’t provide many specifics.

Investors were also pleased by a few new alliances Yahoo announced Tuesday, particularly one to replace Google as the search provider for WebMD. In addition, it will provide advertising on Forbes.com, Cars.com and Ziff-Davis media sites.

Yahoo shares closed down 4% at $26.69 before earnings were announced Tuesday.