Weighing down the quarter was the $22 million -- 17% of net income -- that Yahoo had shelled out for advisors and legal costs to deal with Microsoft and Icahn.
Revenue totaled $1.8 billion, a 6% rise from $1.7 billion a year earlier. After subtracting commissions paid to advertising partners, Yahoo collected $1.35 billion, below analyst projections.
Yahoo commands a smaller share of the online advertising market than Google but has been holding its own. Although the slowing economy took a bite out of finance, travel and retail advertising buys during the quarter, advertising revenue rose 12% from a year earlier, minus the partner commissions.
The firm said it was making progress on a new advertising platform that automates the buying of online ads. The search business also was healthy, with the number of queries growing 11% year over year.
But Yahoo may be testing investors' patience.
"While there is always an interesting array of new product releases and announcements coming from the company, at some point those announcements have to translate into the numbers," said Anthony Valencia, media analyst for TCW Group in Los Angeles. "Thus far, there has been little evidence of that."
The rise in expenses troubled Canaccord Adams analyst Colin Gillis. Despite the departures of key employees and executives, Yahoo added 500 staffers during the quarter for a total of 14,300. But he was relieved to see the company hanging tough in a weakening online advertising market.
"I call it the rice cracker quarter," Gillis said. "It doesn't taste that good, but it's not that bad for you."
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jessica.guynn@latimes.com
