Yahoo's Yang faces sagging profit after Icahn row

The billionaire investor, who had sought Yang's ouster and pushed for a takeover by Microsoft Corp, will become a director and name two others to the 11-person board under an agreement announced yesterday.

While Yang keeps his job, disappointing results will make his position tenuous, said Darren Bagwell, director of equity research at Thrivent Assent Management Inc.

Analysts on average project a 13 per cent drop in earnings when Yahoo reports second-quarter results today, and Yang's promises to lure users from Google Inc and expand sales 72 per cent by 2010 may fail to materialise, Bagwell said.

"The quarter probably won't be that good, probably uglier than some people are expecting," said Bagwell, whose Appleton, Wisconsin-based firm oversaw about $60 billion and had 1.6 million Yahoo shares as of March.

"The inevitable is that there's either a significant change in the upper management team or the thing just gets sold off in pieces."

Yahoo, owner of the second most popular Internet search engine, may say second-quarter sales expanded 10 per cent to $1.37 billion, excluding fees passed on to partner sites, according to the average of 26 estimates compiled by Bloomberg. That is little changed from 11 per cent growth a year ago.

Net income may have dropped to $140 million, or 10 cents a share, from $161 million, or 11 cents, the survey showed.

Rock-Bottom: "The sentiment's pretty much at rock-bottom at this point," said Ross Sandler, an analyst at RBC Capital Markets in New York. "Everybody thinks Yahoo is going to have a crummy quarter."

Icahn, 72, and Yahoo spokeswoman Diana Wong didn't return messages seeking comment. Yahoo will report results after US markets close today.

Yahoo fell 78 cents to $21.67 yesterday in Nasdaq Stock Market trading. Yahoo has dropped 17 per cent since Microsoft walked away from a takeover of the company June 12. Nine analysts recommend buying Yahoo shares, 18 say to hold and four advise selling.

Icahn owns about 5 per cent of Sunnyvale, California-based Yahoo, or more than 68 million shares. He must resign from the board if his stake falls to fewer than 30 million shares, Yahoo said in a regulatory filing yesterday.