SAN FRANCISCO - Yahoo Inc.'s second-quarter profit fell 18 per cent, the latest sign of the financial decay that has frustrated shareholders and raised doubts about the Internet company's future.

But while the results released Tuesday missed analyst expectations, the performance wasn't as bad as many investors had feared after Internet search and advertising leader Google Inc.'s second-quarter earnings disappointed Wall Street last week.

Yahoo shares edged up five cents in extended trading after slipping 27 cents to finish Tuesday's regular session at US$21.40.

The Sunnyvale, Calif.-based company earned $131 million, or nine cents per share, from April through June, compared with $161 million, or 11 cents per share, at the same time last year.

Analysts had projected earnings of 11 cents per share in the most recent quarter, according to Thomson Financial.

Revenue totalled $1.8 billion, a six per cent improvement from $1.7 billion at the same time last year.

After subtracting commissions paid to Yahoo's advertising partners, revenue stood at $1.35 billion - about $20 million below the average analyst estimate.

To the relief of investors, Yahoo didn't dramatically lower its revenue outlook for the remainder of the year despite the dreary economic conditions in the United States and part of Europe.

Management expects 2008 revenue to range from $7.35 billion to $7.85 billion. That was not dramatically different from Yahoo's forecast of $7.2 billion to $8 billion three months ago.

Nevertheless, Yahoo's latest lacklustre performance is likely to intensify the already tremendous pressure on management to lift the company's long-slumping stock price after rebuffing a $47.5 billion takeover offer from Microsoft Corp. in May.

With that bid off the table, Yahoo's market value is about $18 billion below Microsoft's last offer, to shareholders' dismay.

Yahoo chief executive Jerry Yang on Monday gained a little more time to deliver on his turnaround promises by negotiating a truce with dissident shareholder Carl Icahn, who had been threatening to overthrow the company's entire board so he could try to revive sales talks with Microsoft. Now Icahn and two of his allies will join an expanded board consisting of 11 directors.

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