Zacks_Analysts' Blog : Yahoo! Beats by a Penny - Analyst Blog

It was a 23% decrease from the same quarter in 2010, however.

Revenue Beats

Revenue excluding traffic acquisition costs (revenue ex-TAC) came in at $1.064 billion, a 9% decline from the same quarter in 2010, but ahead of the Zacks Consensus Estimate of $1.054 billion.

The decline was due in large part to the revenue share related to the search agreement with Microsoft (MSFT). Under the terms of the deal, Microsoft receives $12 of every $100 in ad revenue generated from clicks alongside ads next to search results.

Excluding this item and other special items, revenue ex-TAC for the first quarter of 2011 was essentially flat year-over-year.

Overall, search revenue ex-tac was down 19%. Display revenue, which accounted for 44% of total revenue, climbed 10%.

Meanwhile, operating income was up 1% over the same period.

Solid Cash Position

Free cash flow for the quarter was down 7% to $59 million. The company repurchased 8 million shares in the quarter for $137 million.

Yahoo! had $3.528 billion in cash, cash equivalents, and short-term investments at March 31, 2011.

Outlook

Management expects second quarter revenue ex-TAC between $1.075 billion and $1.125 billion. Total expenses less TAC are expected to be in the range of $915 million to $935 million.

Operating income is expected to be between $160 million and $190 million.

It did not give specific EPS guidance, but the Zacks Consensus Estimate for the second quarter is currently 17 cents.

Yahoo! is a Zacks #3 Rank (Hold) stock.