(Corrects paragraph 9 to show that sale of stake in Alibaba.com added 4 cents to earnings per share, not 3 cents)
Yahoo Inc's quarterly profit more than tripled as cost cuts and asset sales more than offset a continued decline in sales, sending its shares up 5 percent.
Chief Financial Officer Tim Morse told Reuters the Internet company's top advertisers were beginning to spend again.
Excluding traffic acquisition costs that Yahoo shares with partners, net revenue was $1.13 billion in the third quarter, close to the average analyst forecast of $1.12 billion according to Thomson Reuters I/B/E/S. That compared with net revenue of $1.14 billion in the June quarter and $1.33 billion in the year-earlier period.
The key to Yahoo is that the revenue number is still sequentially flat. We knew the new management could drive some of the cost out of the system, but we want to start to see what can be done to have the company return to growth, said Colin Gillis, analyst at Brigantine Advisors.
This is a company that's still very much in the process of being restructured, he said, adding that the results were a mild positive. They're doing what they're supposed to be doing.
Yahoo has undergone significant restructuring since Chief Executive Carol Bartz took over in January. In April, Yahoo said it would lay off 5 percent of its workforce, or about 675 people, and it has pulled the plug on underperforming properties.
Total operating expenses in the third quarter fell 18 percent from a year ago to $775 million.
Net income was $187.8 million, or 13 cents a share, up from $54.3 million, or 4 cents per share, in the year-earlier quarter. Analysts were looking for 7 cents per share.
Morse said the sale of Yahoo's stake in Alibaba.com contributed 4 cents per share to earnings.
There are definitely signs that the markets have stabilized and spending is starting to free up, Morse said in the phone interview. I'm not going to predict when the growth rebounds, but I feel good that things are no longer on the downward trend.
Yahoo said gross revenue in the fourth quarter would range from $1.6 billion to $1.7 billion, but did not say what its traffic acquisition costs would be. Wall Street was expecting net revenue of $1.22 billion, excluding traffic acquisition costs.
Antitrust regulators in the United States and Europe are evaluating a 10-year Web search partnership between Yahoo and Microsoft Corp, which are joining forces to challenge market leader Google Inc.
By combining their search engines, Yahoo and Microsoft would hold roughly 30 percent of the U.S. search market, compared with Google's 65 percent according to comScore, making their combined audience a more attractive place for marketers to spend their ad dollars.
You have to view Yahoo's cup as being half full rather than being half empty. They seem positioned for a turnaround with the deal with Microsoft and with branding, said Gartner analyst Allen Weiner. They are pretty well-positioned to make a comeback in Q4. These numbers are not going to hurt them.
Shares of Yahoo, the second most popular Internet destination in the United States and one of the largest sellers of online display advertising, rose 66 cents to $17.83 in after-hours trade on Tuesday.
Yahoo's stock is up about 20 percent since early August, regaining the ground it lost following the company's announcement of a 10-year deal to outsource its search technology to Microsoft.
(Reporting by Alexei Oreskovic, writing by Tiffany Wu; Editing by Richard Chang)