Yahoo Improvement Nothing for Yodeling About

(MoneyWatch)  The general tenor for coverage of Yahoo's earnings announcement seems to be that the company topped analyst estimates. However, the numbers aren't as encouraging for the company as many seem to want to believe.

For example, revenue is strictly down by 12 percent in a year-over-year comparison. Even though executives are trying to spin this as OK because ad sales are stabilizing, that sounds like a "make it sound better, Daddy" type of remark. And the increase in profit seems to be what has really caused some confidence in investor- and analyst-land. But even that sounds dubious when you look at some figures:

In the quarter, Yahoo's profit more than tripled to $186.1 million, or 13 cents a share, up from $54.3 million, or four cents a share, a year ago. Those results included a $98 million gain on the sale of Yahoo's investment in Chinese Internet company Alibaba.com.

Parse that out. Over half of the profit -- or $98 million -- was from selling off Alibaba.com, not from ad sales. Without that chunk, the profit was still an improvement over same time last year, but by roughly 58.6 percent.

Also, the profit increase came from tightening the corporate belt. While that may be necessary and good, you don't expense slash your way into greatness. The deal between Microsoft and Yahoo won't count for so much if search continues to decline.

The good-news/bad-news scenario here is that while the rate of decline in the display business is slowing down, the rate of decline in the search business is increasing, perhaps fallout from Yahoo's decision to enter into a pending agreement with Microsoft to outsource search on Yahoo sites.

CEO Carol Bartz continues to try pulling the wagons into a circle. But how much good does that do if they're on fire?