Yahoo Q2 Earnings Slip on Disappointing Search Numbers (Updated)

Carol Bartz declines to talk about rumored-acquisition target Hulu during earnings call

Yahoo's second-quarter earnings met Wall Street's predictions, but erosion in the search market (where Google keeps bigfooting along) and display (the advertising sector that's the key hope for the near future) left its share price declining 3.7 % in after-hours trading.

Under continuing pressure from shareholders, CEO Carol Bartz started the call with the admission that her summary would include "some good, some bad, and some unsatisfactory" results.

Display ad revenue grew 5% to $467 million, an underperformance which Bartz and financial officer Tim Morse blamed on second quarter "transition" in an understaffed sales force. Search revenue was worse still, falling 15% across the year to $371 million. Morse cited weakening in the Asian search market as more of a culprit than the "flat to up" domestic numbers.

An irony of the Asian problem is that the company's would-be partnership with its Chinese partner Alibaba for the Alipay online payment unit is still struggling for traction, but both Bartz and Morse were emphatic that all parties were striving to make the teaming work.

Despite recent rumbles that Yahoo had forsaken its long-bruited move to acquire Hulu, Bartz refused to torpedo the idea, issuing a kind of verbal shrug.

Predicted revenue for the third quarter is between $1.05 and $1.1 billion. Cash on hand was $3.26 million. The company repurchased 30 million shares at a cost of $472 million.

With the costs of traffic acquisition (e.g., their deal with Microsoft for Bing search) set aside, sales revenue was $1.08 billion (below estimates of $1.1 billion), a 5% decline from 2010's second quarter.

Near the end of the Q&A session with analysts, as one suggested the company may want to revise perhaps overoptimistic previous guidance, the somewhat mercurial Bartz showed a bit of pique — "There's a lot of statements in there" she said of the probing question.

A number of analysts believe that in steadily losing ground to the social media competition — Facebook, Google, Twitter et al — Yahoo has a pretty steep hole to climb out of.