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Yahoo Profit Rises, Revenue Falls

Yahoo on Tuesday said its profit rose in the second quarter vs. the same period last year. But a 13% drop in revenue sent its shares down slightly in after-hours trading.

The Internet pioneer reported $141 million in net income on revenue of $1.6 billion, vs. $131 million on $1.8 billion in the same quarter a year ago.

"Considering the economy, I'm pleased with the results," Yahoo CEO Carol Bartz said in a conference call. "Overall, we're seeing less fear in the marketplace" among advertisers.

The results marked Yahoo's first quarterly earnings increase since the first three months of 2008. Earnings, at 10 cents a share, beat the 8 cents forecast by analysts polled by Thomson Reuters.

A withering economy undercut Yahoo's search and ad-display businesses, says analyst Youssef Squali of investment bank Jefferies & Co. But he says the company's long-term prospects remain "positive" because of cost cuts, including Bartz's recent decision to slash 700 jobs, or about 5% of Yahoo's workforce. Yahoo's bottom line could further improve if it forges a search-advertising partnership with Microsoft.

A report in The Wall Street Journal's All Things Digital blog says it could happen soon. USA TODAY could not confirm the report. Yahoo and Microsoft had no comment on a possible deal.

Still, Yahoo shares fell 3% to $16.28 in after-hours trading. Yahoo announced its results after markets closed.

The latest results mirror the economic doldrums that dented Google last week when it reported a modest 3% increase in second-quarter revenue.

Google commanded 65% of online searches in June, compared with Yahoo's 20% and Microsoft's 8%, researcher ComScore says.

Yahoo hopes to partially remedy that with a major redesign of its site's home page - its first significant upgrade since 2006 - that is designed to let people display more material from popular online services such as Facebook and eBay. The new look launched in the U.S. on Tuesday.

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