It's no secret that I was tough on Yahoo during the difficult years. Calling attention to management missteps became a blood sport of sorts. I was tough, but I believe, fair.
Which brings me to tonight's earnings report. The company reported 22 cents a share versus the 9 cents expected, on $1.13 billion in net revenue. The Street was expecting $1.17 billion.
Yes, that top line was a bit of a bummer, and I quibble with the 22 cents since there were 7 cents of what seem to be one-time gains connected to the Microsoft partnership and an acquisition during the quarter. Oh, and with Yahoo shares right near a 52-week high, the company needed to report something that justified its recent rally. And one other thing: at 43 times this year's earnings, and 30 times next year's, this stock is actually trading at a premium to Google.
So that's all the bad news. But there's a part of Yahoo's report tonight that's deserving of some extra attention. Display ad revenue surged 20 percent, way ahead of the 12 or 13 percent expected. This is core to Yahoo's broader story and I think once investors get their arms around this part of the report, Yahoo shares should recover.
Display ad revenue improvement could be like the gift that keeps on giving. As I posted earlier, Yahoo seems comfortably snuggled into the market as a solid #2 to Google. This kind of strength in display ads, and the ability to translate it to the bottom line is critical for Yahoo. It's a very good sign that investors might be overlooking, caught up instead in the after-market trading of these shares.
The company's gross revenue guidance is essentially in line, and operating income looks very good for Yahoo's second quarter. Yahoo is an expensive stock relative to other tech stalwarts. Apple trades at a bigger discount. Same with Google. HP also. There are certainly better places to put your tech investment dollar, and there's still squeamish uncertainty about Yahoo's future.
But for the first time, there are tangible signs that Dr. Bartz has taken this patient out of ICU and it's now resting comfortably in a private room upstairs. Yahoo's recovering nicely, but still has a ways to go. Meantime, give credit where credit is due. CEO Carol Bartz is getting the job done.
Questions? Comments? TechCheck@cnbc.com