Yahoo reports lowest quarterly revenue in 6 years

But dense investors think beating low expectations is some kind of victory

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Yahoo CEO Carol Bartz claimed in an earnings conference call Tuesday afternoon that the embattled company's "turnaround is proceeding on schedule."

I didn't realize Yahoo had a 100-year plan.

The reality is that Yahoo is nowhere close to turning things around. Cutting costs by shutting down losing businesses and laying people off isn't turning things around for a company whose main problem is stagnant sales.

However, since Wall Street now has ridiculously low expectations of Yahoo, the company's shares apparently can get a bump if employees turn in loose change in the parking lot and call it revenue.

Which might not be a bad idea, for Yahoo's first-quarter revenues of $1.2 billion are the lowest since Q1 2005 -- that's 20 quarters ago, folks -- when it generated $1.17 billion in revenues. They're also down 24 percent from the $1.6 billion in revenues from last year's first quarter.

Yahoo's net income for Q1 was $223 million, or 17 cents a share, down 28 percent from $312 million, or 22 cents a share, in last year's first quarter.

But because revenues excluding commissions paid to advertising partners were $1.06 billion -- meeting consensus estimates -- and net income excluding some items was 19 cents a share, topping expectations of 16 cents a share, investors in after-hours trading boosted Yahoo shares as high as $17, or 5.5 percent above Tuesday's closing price of 16.12.

Perhaps Wall Street also found a silver lining in Yahoo’s display advertising business -- cornerstone of the comeback! -- which grew to $471 million, or 10 percent more than the year-ago quarter. Which sounds great, until you realize that Yahoo's search revenue, after paying out to partners such as Microsoft, plummeted 19 percent to $357 million.

Speaking of Microsoft, it turns out the much-hyped search partnership is fizzling. From the New York Times:

Ms. Bartz acknowledged in the (conference) call that the Microsoft partnership, a prominent deal when it was announced two years ago, has not met expectations. Technical complications have made the revenue the two partners collect per search decline since their search engines were combined.

Still, Yahoo said it would receive a guaranteed minimum payment from Microsoft for the next year in the United States, regardless of how search advertising performs. After that, the payments may decline if the problems are not fixed. “We are working very close with Microsoft on these issues,” Ms. Bartz said.

Are you paying attention, Nokia?

Some Yahoo defenders will say revenue is lower because it sold e-mail company Zimbra last year and has shuttered some business units. To quote Steve Ballmer, blah blah blah. The businesses and products the company discontinued were losers, weren't they? So how much revenue did that really cost the company?

At some point excuses don't cut it. A company's stock price isn't going to rise if the company can't increase revenue. And Yahoo hasn't been able to for more than two years, which explains its moribund share price.

Meanwhile, Google, which is in the same basic business the last time I checked, recently increased its Q1 revenue by 27 percent. Which just about says it all.

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