Wake Up, Yahoo!

Even analysts seem to be phoning it in when it comes to Yahoo! (NAS: YHOO) these days.

Heading into tonight's quarterly report, Wall Street pros were forecasting a profit of $0.17 a share (flat with last year's showing) on revenue minus traffic acquisition costs of $1.06 billion (again, flat with last year's showing).

Yahoo!'s results seem impressive at first glance. Revenue inched only 1% higher to $1.077 billion, but earnings on a per-share basis soared 38% to $0.23 a share. This is a slight beat on the top line and a huge beat on the bottom line, but put away the purple noisemakers.

Display advertising revenue -- which is what Yahoo! chose to focus on when it temporarily handed over its search business to Microsoft (NAS: MSFT) -- actually declined by 4%. Bing's grunt work helped fuel an 8% increase in search revenue, but that's a far cry from the 24% revenue surge posted by market leader Google (NAS: GOOG) just last week.

The bottom-line victory is even more shaky. Operating income actually declined 11%. If it wasn't for earnings from Yahoo!'s equity interests more than doubling and heavy share buybacks over the past year, profitability would have clocked in lower than last year's $0.17 a share showing.

Yahoo! has its hands full. A potential asset sale failed to go through earlier this year. A new CEO is trimming payroll fat. Material growth is still a no-show. The company's forecast calls for revenue sans traffic acquisition costs of $1.03 billion to $1.14 billion, and the midpoint is almost the $1.08 billion it served up a year earlier.

The silver lining here is that Yahoo! has money in the form of a healthy cash balance and even healthier Asian assets. As long as it has money, Yahoo! has time. As long as Yahoo! has time, the dot-com pioneer has hope.

After coming up short on potential acquisitions that went on to soar in value, Yahoo! knows what it has to do at this point. Shaving costs will only get the Yahooligans so far. Whether it's a matter of pulling off an asset sale, cashing out on the entire company, or making a head-turning buyout, the end result remains the same: Yahoo! finally needs to seal the deal.

Start bleeding purple
Yahoo! may or may not be looking to cash out of its Asian assets, but others are hoping to expand overseas. There are three American companies set on dominating the world. Yahoo!, as you can imagine, isn't one of them. It's a free report, and it's yours now.

At the time thisarticle was published The Motley Fool owns shares of Google, Yahoo!, and Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Yahoo!, Microsoft, and Google and creating a bull call spread position in Microsoft. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns no shares in any of the stocks in this story and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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