Sunnyvale, Calif. – Yahoo, owner of the most-visited U.S. website, said second-quarter profit fell 2.3 percent as Google extended its lead in Internet search queries and new rivals took sales in display advertising.
The shares fell after Yahoo said net income dropped to $160.6 million, or 11 cents a share, from $164.3 million, or 11 cents, a year earlier.
Sales, excluding revenue passed on to partner sites, rose 11 percent to $1.24 billion, the company said Tuesday in a statement.
Yahoo forecast revenue for the rest of the year that trailed most analysts’ estimates. The company’s diminishing share of the search market has contributed to six straight quarters of declining profit and the slowest sales growth since 2001.
“There are big problems,” said Jordan Rohan, an analyst at RBC Capital Markets in New York, who rates the shares “outperform.” “Significant changes need to take place within the next six to nine months.”
The company last month brought in co-founder Jerry Yang as chief executive to help close the gap with Google and win back sales of banner ads lost to competitors such as Facebook and News Corp.’s MySpace.
Second-quarter profit matched the average analyst estimate of 11 cents a share, according to a Bloomberg survey. Sales also met analysts’ expectations.
Yahoo forecast net sales in the third quarter of $1.17 billion to $1.31 billion and full-year revenue of $4.89 billion to $5.19 billion. Analysts had expected sales of $1.29 billion in the period and $5.18 billion for the year, higher than the midpoint of Yahoo’s forecast.
Yahoo’s share of U.S. Internet queries dropped to 21.5 percent in May, from 22.9 percent a year earlier, while Mountain View, Calif.-based Google jumped to 56.3 percent, from 49.1 percent, according to New York-based Nielsen//NetRatings.
Yahoo in February introduced Project Panama, an advertising program designed to make advertisers’ Web links more relevant and more likely to be clicked.
