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Yahoo Earnings: Still Waiting for CEO Bartz to Turn into Steve Jobs

As the song lyrics go, Yahoo (YHOO) wanted to accentuate the positive and eliminate the negative in its earnings announcement. Unfortunately for the company and its investors, Yahoo is thoroughly ensconced in the land of Mr. In-Between. Attempts to paint a picture of the company on the path to recovery have become tired over the last two years as CEO Carol "call me Steve Jobs" Bartz has continued to beat the same drum.

However, Yahoo is clearly stuck. Sure, there was some good news. For example, net earnings were more than double year-over-year for the quarter on a GAAP (US accounting standards) basis. Some of the growth was due to a disparity in restructuring charges in both 2009 and 2010. Eliminate them, and the gain was 80 percent. Operating margin was up to 11.8 percent from 5.8 percent last year.

But that is cost cutting and a shift of ad revenue from partner sites to Yahoo's own. Important, yes, but the time for making such steps the main focus of attention is long past. Yahoo continues to drag like an anchor slowing a rowboat. Quarterly revenue was up a measly 2 percent. Compare that to any other company in the same space, such as Google (GOOG) or Microsoft (MSFT), and you have the definition of anemic.

Some of its strategic moves, such as introducing new video content, might make sense if Bartz could only articulate a clear vision of what the company is and what it does. But she's been unable to. In fact, to point to "progress," she had to fall back in part to purchasing Associated Content and Citizens Sports, and those acquisitions happened in May and March, respectively. Hey, Carol, it's the middle of October. Not to be pushy, but why talk about things upwards of seven months old?

It's because there is increasing pressure for Bartz to show results from all the time she's requested for the turnaround, and they simply aren't happening. Every new CEO deserves time to take action, because you can figure a good 18 months before fundamental changes really begin to take hold. But all that happens at Yahoo is less bleeding of money. And, speaking of money, both cash flow and free cash flow were down. Cash and cash equivalents dropped by over $1 billion at a time that management wants to do a stock buy-back. "Because we recognize the tremendous value of our assets," the earnings release quotes Bartz. Closer to the truth would be because investors are unhappy that the stock is in the pits. Look at this charge (via Google Finance) that compares Google, Microsoft, AOL (AOL), and Yahoo stocks.

But forget stock prices for a moment, as they don't necessarily indicate the sound running of a business. Over the first nine months of 2010, revenue was up a total of 1.5 percent year over year. Gross profit didn't even manage to grow by 0.5 percent. It doesn't matter how efficiently a company runs if it isn't going anywhere.