Yahoo Earnings Preview: Will Carol Bartz Beat the Street?

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Ahead of Yahoo's (YHOO) quarterly earnings report Tuesday, all eyes are on still relatively-new CEO Carol Bartz (pictured) and the progress she has made -- or hasn't -- in turning around the struggling Web pioneer. Yahoo continued to lose search market share to Google (GOOG) in the last quarter, and the company is awaiting Justice Department approval for its search ad pact with Microsoft (MSFT). But analysts are looking for improvements in the company's display ad business.Wall Street analysts expect Yahoo to report earnings of 11 cents per share on net revenues of $1.23 billion for the fourth quarter, which would represent a 10% decline in year-over-year revenue. Still, if Yahoo beats the Street's low expectations, look for upside movement in the stock.

"We expect a decent quarter driven primarily by macro improvements, upside from [owned and operated] display, and stable cost controls," Broadpoint AmTech Internet analyst Ben Schachter wrote in a note to clients. "However, concerns around search share and audience usage may limit 2010 guidance upside."

Yahoo has sustained three consecutive quarterly revenue declines of at least 12%.

In her first full year as Yahoo's CEO, Bartz has made significant progress cutting Yahoo's costs and streamlining the company's business operations but "eventually she will need to show real growth and innovation to investors," as All Things Digital's Kara Swisher notes.

Yahoo has been on a roller coaster ride for several years. Under the leadership of co-founder Jerry Yang, the company endured a sustained whipping from Google. Two years ago, with Yahoo vulnerable, Microsoft tried to buy the company for $40 billion, leading to a nearly year-long takeover battle and a soap opera that eventually cost Yang his job, though Yahoo remained independent.

Bartz was brought in to right the ship, and one of her first major steps was finalizing a search ad deal with Microsoft. Under the terms of the plan, Microsoft's Bing engine will power search for both companies, with Yahoo receiving 88% of the revenue derived from text ads on its site.

The two companies are waiting for the Department of Justice to sign off on the deal -- which may represent the last best hope for a truly competitive rival to Google. Approval is expected and could come within the next few weeks.

Still, not everyone thinks that the deal will be the silver bullet Bartz is hoping for. "Over the past 10-15 years, we have yet to see a company gain market share after outsourcing its search...and we doubt Yahoo will be the first," ThinkEquity analyst William Morrison wrote in a note to clients recently.

Last week, Google reported a fourth-quarter profit of $2 billion on $6.67 billion in total revenue, and returned to double-digit growth for the first time in a year. To put that in perspective, analysts are looking for Yahoo to book total net revenue of of $1.23 billion for the quarter.
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