Marissa Mayer powers Yahoo Q2 earnings 46%, but revenue sinks

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Yahoo CEO Marissa Mayer Yahoo CEO Marissa Mayer
SummaryYahoo remains stuck in a revenue rut muting celebration of Marissa Mayer's first year in co.

Yahoo remained stuck in a revenue rut during the second quarter (Q2), muting the celebration of CEO Marissa Mayer's first year running the Internet company.

The numbers released Tuesday showed Yahoo Inc.'s earnings are still rising, but they also highlighted the challenges facing the company as it loses ground to rivals Google Inc. and Facebook Inc. in the online advertising market that generates most of their revenue.

Yahoo sold slightly fewer display ads than it did at the same time last year, and the prices that marketers were willing to pay for the space fell by 12 per cent, too. The Sunnyvale, Calif., company made some small strides in the Internet ad market dominated by Google, but it still wasn't enough to prevent Yahoo's revenue from slipping in a quarter when the digital ad market in the U.S. increase by 15 per cent, based on estimates by the research firm eMarketer.

Google's second-quarter earnings, due out Thursday, are expected to show even more robust growth.

Yahoo's nagging ad headaches initially dragged down the company's stock by more than 2 per cent in extended trading, but the selling reversed after management assured investors that it intends to keep buying back the company's stock. The commitment comes after Yahoo had already spent $3.6 billion buying back about 190 million of its shares since last year, fulfilling a pledge that Mayer made shortly after the company realized a $7.6 billion windfall from selling nearly half of its stake in Chinese Internet company Alibaba.

The extension of the share repurchases pleased Wall Street because it should help support Yahoo's stock price in the months ahead. Besides helping to fuel demand for the stock, the repurchases help increase earnings per share by reducing the volume of outstanding stock. Yahoo now has 10 per cent fewer shares outstanding than a year ago. The company indicated it may spend another $1.9 billion buying back its stock, which would be enough to take about 70 million more shares off the market at current prices.

As of late Tuesday, Yahoo's stock had gained 22 cents to $27.10 in extended trading. The shares have gained more than 70 per cent under Marissa Mayer's leadership.

In an unusual live video presentation streamed on Yahoo's website, Marissa Mayer focused on other things besides finances while reviewing the company's progress since she defected from a top job at Google a year ago to try to rejuvenate one of the Internet's

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