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sadhooYahoo announced another steep drop in net revenue today, citing the limping online advertising market for search and display ads as the cause for losses spanning three consecutive quarters. On a (dimly) positive note, the company did see second-quarter earnings per share that beat analysts’ expectations — but mostly due to severe cutbacks (its net income increased by almost 8 percent to $141.4 million for the same reasons).

Not only did revenue decline yet again (hitting $1.58 billion), it dropped further: 16 percent in the second quarter, compared to 14 percent in the first of last year. Year-over-year, it dipped 13 percent. This is fairly damning data considering that Yahoo’s arch rival, Google, posted a 3 percent uptick in year-over-year revenue last week.

Yahoo was hobbled this quarter by a 15 percent free fall in search advertising revenue — a much higher figure than market watchers has predicted. Similarly, revenue from display ads dropped 14 percent since last year. Compounding the situation, revenue from the company’s affiliate sites dropped 9 percent to $520 million. To combat these trends, Yahoo laid off close to five percent of its staff. For now, it says it will continue looking at non-headcount related strategies for trimming costs, but that might be a pipe dream.

CEO Carol Bartz is putting a positive spin on the company’s earnings announcement, emphasizing that the number beat out analyst projections of $1.14 billion in net revenue. A new sense of confidence is evident in the company’s projections for third quarter revenue between $1.45 and $1.55 billion. In addition, it just rolled out a bold new redesign of its homepage meant to highlight the most profitable facets of the business.

Still, however, many wonder whether the weak report will spur Yahoo to agree to a partnership with Microsoft, giving the latter some control over its search operations.


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