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Street Sees Promise at Yahoo!

Talk about a tumultuous quarter.

During its fourth quarter, Yahoo! (YHOO) saw the leak of an internal memo criticizing the company for lacking a vision , a dramatic announcement of a major reorganization and a steady stream of senior executives heading for the door .

It seems that any one of those events would be enough to give the Street pause. But Yahoo!, gearing up to announce its fourth-quarter results Tuesday, has seen its stock rally more than 20% to $27.40 since October lows.

Shares closed the regular session Monday off 22 cents but regained 16 cents to $27.58 in extended trading.

After Yahoo!'s depressing third quarter, in which the company failed to meet consensus revenue expectations and softened its guidance for the fourth quarter , Wall Street now seems to believe that the worst is over and that the Sunnyvale, Calif.-based company can finally deliver on its many strengths.

"Product transitions, market changes, intense competition and management changes create uncertainty," Morgan Stanley analyst Mary Meeker wrote in a research report last week.

"But when core strengths are solid -- as Yahoo!'s product offerings, market share, user base, usage growth and talent depth are -- often times things can appear at their worst just before they show marked improvement. It's our bet that's where we are with Yahoo!," wrote Meeker, whose firm has business relationships with Yahoo!

Analysts surveyed by Thomson First Call expect Yahoo! to report earnings of 13 cents a share on revenue of $1.2 billion. That number falls in the middle of Yahoo!'s own guidance between $1.15 billion and $1.27 billion.

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