Yahoo's 4Q Profit Tops Analyst Forecasts

A Yahoo! headquarters sign is shown in Sunnyvale, Calif., Monday, Jan. 22, 2007. Yahoo Inc. is expected to report earnings for the fourth quarter and fiscal year 2006 after the market closes. (AP Photo/Paul Sakuma) (Paul Sakuma - AP)

SAN FRANCISCO -- After beating analysts' earnings expectations for the first time in more than a year, Yahoo Inc. is hoping to make it a more regular habit with an improved advertising system designed to make the Internet icon more competitive with the Web's top moneymaking machine, Google Inc.

The Sunnyvale-based company plans to unveil the long-awaited upgrade in the United States on Feb. 5, nearly two months ahead of a timetable that management outlined in October. That announcement, made late Tuesday, lifted Yahoo's stock price nearly 6 percent and overshadowed the Sunnyvale-based company's fourth-quarter profit report.

Yahoo said Tuesday that it earned $268.7 million, or 19 cents per share, during the final three months of 2006, traditionally the peak season for Web sites like Yahoo that depend on advertising for most of their revenue.

The profit declined 61 percent from net income of $683.2 million, or 46 cents per share, at the same time in 2005, but the two quarters didn't provide an apples-to-apples comparison. That's because a one-time gain of $310 million boosted the 2005 results, while the 2006 figures included stock option expenses that weren't recorded on Yahoo's books in the previous year.

If not for certain tax benefits, Yahoo said it would have made 16 cents per share _ 3 cents above the average estimate among analysts surveyed by Thomson Financial.

It marked the first time that Yahoo had fared better than analysts anticipated since the third quarter of 2005.

Meanwhile, Google _ the yardstick by which Yahoo is inevitably measured _ made its rival look bad by easily exceeding analyst expectations through the first three quarters of 2006. The online search leader will release its fourth-quarter results next week.

Yahoo is counting on its new advertising platform, code-named Panama, to rejuvenate its growth later this year.

The decision to flip the switch on the new technology ahead of schedule helped boost Yahoo's stock price by $1.57, or 5.8 percent, in Tuesday's extended trading. The shares had previously shed 46 cents to close at $26.96 on the Nasdaq Stock Market.

"A lot is riding on this," Cantor Fitzgerald analyst Derek Brown said. "Will it make 2007 an improvement over 2006? Yahoo better hope so."

The company originally hoped to introduce Panama late last year but decided to delay the high-stakes project to give its engineers more time to work out the kinks.

"I made the decision to get it right rather than be fast," Yahoo Chairman Terry Semel said in an interview Tuesday. "We have taken all the time we need, and the (test) results have been very impressive."