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Yahoo's Finally in the Game Again

Carol Bartz is worth every penny. In a very short period of time, she has re-engineered a sagging shell of its former self into something compelling for Yahoo investors again. And as the company prepares to release its earnings tonight after the bell, I'm not ready to proclaim "game-over," but I am willing to bet "Yahoo's finally in the game again."

Yahoo
CNBC.com
Yahoo

In quarters past, when Google

reported earnings, we automatically used those numbers to extrapolate what to expect from Yahoo.

Bartz has made it her mission, first with me in no uncertain terms at the "D: All Things Digital Conference" in May, and then again at the company's shareholder meeting last month, that Yahoo is so much more than a Search competitor with Google.

And the message is beginning to resonate.

Yahoo might be the only social networker actually making money. It's Messenger, and Finance, and Sports, and Entertainment. It's email, and jobs. Oh, and it's Search too. And it enjoys a top position in all those categories. So much so that it's the most visited website around.

Finally, someone is running the show at Yahoo with a loud enough mouth to accentuate the positive and actually have it mean something. Bartz is a gem.

But now the real work begins: Squeezing money out of all those hundreds of millions of visitors every month. Yahoo's numbers tonight will be important. Same with guidance. But more important is strategic direction, guidance, and yes, say it with me: Microsoft , Microsoft, Microsoft. (I've said it before: I think at this stage Microsoft needs Yahoo more than Yahoo needs Microsoft, but either way, they both need each other, now more than ever, and a deal needs to get done.)

On the earnings front, Yahoo should post 8 cents a share on $1.15 billion in net revenue. EBITDA should be around $400 million. For the Third Quarter, look for gross revenue over $1.5 billion and EBITDA north of $400 million.

Citi's Mark Mahaney released his helpful cheat sheet, indicating display advertising should see a decline of 16 percent, though anything less than 13 percent could be positive for the company. Search advertising should decline around 12 percent, though a slide less of 5 percent or less could be a bullish sign. And he's looking for about $197 million in fees revenue.

Those are at least some of the key metrics. But the sub-plot lines here are palpable. Microsoft's Bing seems to be gaining momentum. Google beat the Street last week, but it's numbers showed Search advertising continues to sag. Yahoo is unveiling today its new home page. Social networking continues to generate lots of headlines and venture capital, though no meaningful profits of any kind.

So all of that is both good and bad for Yahoo. Good in the sense that there's still interest in the net, and Yahoo's brand, complete with today's homepage redesign months ahead of schedule, is regaining some long lost luster. But bad in the sense that there's still this economic morass through which everyone is trying to navigate. And Yahoo has no real track record of being able to navigate its way successfully through anything, at least over the last five years. (Yes, the irony is thick.)

Still, I think that's where Yahoo's opportunity seems to be. While Google throws billions at an idea here, or an idea there, trying to go up against Microsoft by operating way outside its comfort zone, Yahoo already has the potential revenue streams in place and the infrastructure to support them. Google seems distracted. They just gotta figure out the right method to do so.

Oh, and rather than fighting Microsoft, Yahoo's trying to come up with the best, financially viable way to cozy up to them.

Yahoo's upside seems far rosier than Google's, if only because of the Law of Large Numbers. It's just a matter of how patient investors can be (and they've demonstrated almost irrational patience in the past so I don't think that's an issue) and Yahoo's ability to execute (which has been a huge issue in the past, but might finally be changing under Bartz's whip and chair.)

The time for rhetoric has passed. Bartz has to prove (beyond cosmetic changes to the home page) that her redesign of the company itself is ready to start paying dividends. The first chapter of her tenure has been a fascinating read. Time to turn the page and see if Yahoo can start making some real money and enjoy some real growth.

Yahoo seems focused. It's a dramatic shift for both.

For Yahoo, it's lookin' good.

So far.

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