Yahoo! Sharpens Its Tech Edge

The notion of a focused search engine is another innovation Yahoo! has been aggressively pursuing. Increasingly, more sites are preferring vertical search -- or search tailored to a specific area, such as retail, health or travel -- to general searches that can bring in irrelevant results. Yahoo! bought travel search site FareChase last summer, and last week it announced upgrades for finer-tuned searches.

Unlike many online travel companies that are conflicted by revenue-sharing and investments by major airlines, a travel search engine such as FareChase is agnostic, able to reveal the best overall deal for users. "Even if consumers don't initially discover vast savings by employing these vertical search engines, travel search gives buyers a free, fast way to confirm they have made the best purchase and the convenience of one-stop comparative shopping," said Wolk.

These incremental developments are leading to a slight recovery in Yahoo!'s stock. In December, Yahoo!'s stock hit a four-year high of $39.79, then fell to a near-term low of $30.86 on March 22 amid broad concerns about the outlook for e-commerce and search companies. Two days later, Yahoo! announced it would buy up to $3 billion in common stock, or about 7% of its market cap, over the next five years -- a tacit admission that its stock was undervalued relative to what lay ahead. On Tuesday, Yahoo! closed at $35.15, up 14% from its March low.

"The buyback program signals that current fundamentals, including for Q105, remain on or ahead of plan," Michael Gallant, an analyst at CIBC World Markets, says in a research report on March 24. His company does not have an underwriting relationship with Yahoo!.