Yahoo 2Q profit up 8 percent, yet ad slump continues

Yahoo Inc. eked out a slightly higher profit in the second quarter as its new, no-nonsense chief executive cut enough expenses to shake off the Internet company’s sharpest drop in ad revenue since the dot-com bust.

The worsening ad slump overshadowed Yahoo’s first quarterly earnings increase since the start of 2008, causing the company’s shares to fall more than 4 percent after the results were released Tuesday.

The higher profit nevertheless suggested Yahoo CEO Carol Bartz is making some progress toward snapping the Sunnyvale-based company out of its financial funk — the main reason she was hired six months ago.

Since her arrival, Bartz has been focused on identifying Yahoo’s strengths and weaknesses, weeding out bureaucracy and cutting deeper into a payroll that had already begun to thin under her predecessor, company co-founder Jerry Yang.

Yahoo ended the quarter with 13,000 employees, down 9 percent from 14,300 workers at the same time last year. That enabled the company to lower its cash expenses by about 25 percent, excluding severance costs, said Tim Morse, a cost-cutting specialist whom Bartz recently hired as Yahoo’s chief financial officer.

“The quarter was a mixed bag, but I am pleased we could control the things that we could control — and that was the cost side of the equation,” Morse said in an interview Tuesday.

Yahoo plans to loosen its purse strings in the second half of the year to promote its brand and hire more workers in key technology areas, Morse told analysts in a conference call. He emphasized the expenses would not rise back to the levels they were last year.

“We will be disciplined where we spend our time and money,” he said.

Yahoo made $141.4 million, or 10 cents per share, in the three months ending in June. That was up from income of $131.2 million, or 9 cents per share, last year.

Analysts surveyed by Thomson Reuters had predicted Yahoo would earn 8 cents per share.

Revenue for the period slid 13 percent to $1.57 billion. That’s the biggest decline so far in a slump that has seen Yahoo fall further behind Internet search leader Google in the online ad market.

By contrast, Google’s revenue rose 3 percent to $5.5 billion in the second quarter.

After subtracting commissions paid to its advertising partners, Yahoo’s revenue stood at $1.14 billion. That matched analyst projections.

The results came as Yahoo unveiled a new home page in a long-promised makeover meant to make it easier to see what’s happening at the Internet’s other hot spots. The idea is to help Yahoo recapture some of the buzz it has lost to increasingly popular online hangouts like Facebook, MySpace and Twitter.

Yahoo shares slid 71 cents, or nearly 4.2 percent, in extended trading Tuesday after the results were released. Earlier, it finished the regular session down 26 cents at $16.75.