SAN FRANCISCO (Reuters) – Yahoo Inc said an important partnership with Microsoft Corp is taking longer than expected to pay off, but the company posted quarterly earnings that topped Wall Street targets, sending shares up in after-hours trading.
The mixed progress report comes as expectations for the Web portal remain low two years into Chief Executive Carol Bartz’ effort to revive growth at the company.
“Clearly there is some improvement in the business here, both from a topline perspective and a margin perspective,” said Pacific Crest Securities analyst Steve Weinstein.
“The growth in their display business, when you peel everything back, continues to look good,” he said.
But analysts said Yahoo’s search business, which experienced a 19 percent year-on-year decline in net revenue in the first quarter, is a cause for concern.
Yahoo executives said on Tuesday that the company would delay plans to use Microsoft’s search advertising system in certain markets as it waits for Microsoft to improve the technology.
In its current state, Yahoo executives said, the Microsoft search technology was not delivering the expected lift to Yahoo’s search ad revenue.
Revenue per search won’t rise to levels Yahoo experienced pre-Microsoft until the end of the year, compared with a previous forecast of mid-year, Bartz
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