Yahoo posts higher profit but outlook weak

By Yinka Adegoke and Anupreeta Das

NEW YORK/SAN FRANCISCO (Reuters) - Yahoo's (YHOO.O) fourth-quarter results beat Wall Street's low expectations, thanks to a series of cost cuts in a weak advertising market, sending its shares up 5 percent in a relief rally on Tuesday.

However, Yahoo gave first-quarter forecasts for operating income that were well below Street estimates and refrained from giving its usual full-year outlook, which disappointed some analysts and underscored the uncertainties the company faces.

"They didn't bleed to death as much as some of the bear scenarios" had predicted, said Martin Pyykkonen, an analyst at Wunderlich Securities.

"It's certainly not good results and not a good outlook, but relative to the kind of general fears in the market, I wouldn't say it was any worse," he added.

Yahoo, the leading provider of online display advertising, has been under pressure for nearly a year as it held fruitless merger or partnership talks with Microsoft (MSFT.O), Google (GOOG.O) and Time Warner's (TWX.N) AOL.

During that time, Yahoo lost market share in search advertising, while display ad sales have been badly hit industrywide by the U.S. recession. Yahoo shares have plunged 60 percent from a 12-month high of $30.25, after Microsoft made an unsolicited bid for the Silicon Valley company last February.

The stock rose 5.4 percent to $11.95 in after-hours trading following the results, from their Nasdaq close of $11.34.

Fourth-quarter profit, excluding write-downs and one-time charges associated with Yahoo's restructuring efforts, rose to $238 million (167 million pounds), or 17 cents per share, from $205.7 million, or 15 cents per share, a year earlier.