Yahoo Inc's first quarter profit fell 11 percent, disappointing investors who have been betting that the Internet icon had regained its stride after stumbling through much of last year.
The letdown hit Yahoo's stock price, which plummeted more than 8 percent after the results were released on Tuesday. Management added to the angst by leaving its financial outlook for the remainder of the year unchanged from its last forecast three months ago.
The Sunnyvale, California-based company earned US$142.4 million, or US$0.10 per share, during the three months ended in March. That compared with net income of US$159.9 million, or US$0.11 per share, for the same period last year.
The results were below the average earnings estimate among analysts surveyed by Thomson Financial.
Revenue for the period rose 7 percent to US$1.67 billion.
After subtracting advertising commissions, Yahoo's revenue totaled US$1.18 billion. That figure fell about US$25 million shy of the average analyst projection, according to Thomson Financial.
"When you sift through everything, there is not a whole lot to get excited about right now," said Cantor Fitzgerald analyst Derek Brown.
Yahoo shares shed US$2.61, or 8.1 percent, in extended trading after gaining US$0.48 to close at US$32.09 on the NASDAQ.
The first-quarter downturn may renew concerns about it's ability to compete against Google Inc, whose search engine propels the Web's most lucrative advertising network.
Through March, Google held a 48 percent share of the US search market compared with 27.5 percent for Yahoo, according to comScore Media Metrix. Google is scheduled to report its first-quarter results today.
Yahoo has pledged to narrow the gap with its rival this year with the recent introduction of a new marketing platform -- dubbed "Panama" -- that is supposed to do a better job of distributing ads that will spur revenue-generating clicks. Meanwhile, Google is bolstering its arsenal with its planned US$3.1billion acquisition of a major online advertising placement service, DoubleClick Inc.
Some analysts believe Yahoo chairman Terry Semel could lose his job as chief executive officer if Panama does not accelerate the company's earnings growth. Semel, who is approaching his sixth anniversary as Yahoo's chief executive, did not sound worried during an interview on Tuesday.
"I feel really good," he said. "The results are great and we are very happy with what we have done so far."
Yahoo has also raised Wall Street hopes by negotiating potentially lucrative advertising partnerships with Viacom Inc and 264 US newspapers.