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Yahoo Edges Profit Forecasts, but Shares Slide

Yahoo posted revenue in the second quarter that fell short of Wall Street estimates as Internet advertisers spent less than the company expected, prompting shares to tumble.

The online advertising and search firm said it earned 15 cents a share in the second quarter excluding one-time items, up from 10 cents a share during the same period last year.

Excluding traffic-acquisition costs (TAC), sales for the most recent period came in at $1.13, against $1.136 billion last year.

Yahoo was seen reporting a profit of 14 cents a share on revenue of $1.157 billion, according to a Thomson Reuters survey of 27 analysts who follow the company.

The stock, which finished the regular Nasdaq session at up slightly at $15.20, was changing hands more than 7 percent lower after the bell. Get after-hour quotes for Yahoo here.

Yahoo forecast a revenue range between $1.57 billion and $1.65 billion in the third quarter. Tim Morse, the company's finance chief, told Reuters Tuesday that he expected the traffic acquisition costs in the third quarter to range between 29 percent and 29.5 percent of revenue.

Morse also said the company experienced "big customer weakness" among its display advertisers in the United States toward the end of June, with some pushing orders back until July.

"It has definitely made us incrementally a little bit more cautious," he said.

However, on a conference call on Tuesday, Yahoo Chief Executive Carol Bartz said that the company's experience with spending on display ads in the first three weeks of July indicates that "we're back to normal."

The results released Tuesday could cause some investors to doubt the strategy of no-nonsense Bartz, who was hired 18 months ago to lead the company out of a prolonged financial funk that has depressed its stock.

Bartz has been able to boost Yahoo's earnings by cutting costs, but so far hasn't been able to produce dramatic revenue gains.

The challenges facing Yahoo are similar to those at many other companies that have been fattening their bottom lines by trimming expenses while revenue remains lean.

"We still have plenty of work to do," Morse told the Associated Press.

Last week Yahoo rival Google saw its shares drop sharply after the company reported a profit that failed to match what Wall Street was expecting.