Yahoo third-quarter net income drops from a year ago

Yahoo posted third-quarter results in line with lowered forecasts, with net income dropping greatly from a year ago on higher stock compensation expenses and lower than expected ad sales.

Net income, including stock compensation expenses, was $159 million, or 11 cents a share. That compares with a year-ago figure of $254 million, or 17 cents a share. Yahoo had $80 million of stock-based compensation expense.

Revenue for the quarter, which ended Sept. 30, was $1.12 billion, excluding traffic acquisition costs, which are fees shared with content partners. That is a 20 percent increase from the $932 million in revenue recorded a year earlier.

Analysts polled by Thomson Financial were expecting Yahoo to post third-quarter earnings per share of 11 cents, including stock-based compensation expenses, and revenue of $1.14 billion, excluding traffic acquisition costs.

"While we are tremendously excited about many things happening at Yahoo, we are not satisfied with our third quarter financial performance," Yahoo Chief Executive Terry Semel said in a statement. "We continued to grow and believe that we outperformed the graphical (advertising) market but not at a rate that met our expectations."

Yahoo warned in September that its third-quarter revenue would be at the bottom half of its forecast range because of weakness in auto and financial services advertising. The forecast had been for revenue of $1.12 billion to $1.23 billion, excluding traffic acquisition costs.