Yahoo! to Slash 10% of Workforce (Update)

Excluding special items, Yahoo! said it earned 9 cents a share, in line with Wall Street estimates.

Revenue climbed to $1.79 billion, a 1% increase from $1.77 billion a year ago. Excluding traffic-acquisition costs (TAC), which is the portion of revenues shared with partners, Yahoo! posted a total of $1.33 billion, just short of the Street's estimate for $1.37 billion.

For the fourth quarter, the company said it expected revenue of $1.77 billion to $1.97 billion (including TAC), and operating cash flow of $490 million to $570 million.

But for the full year, Yahoo! reduced its revenue guidance to the range of $7.18 to $7.38 billion, including TAC. That was down from its previous forecast of $7.35 billion to $7.85 billion.

Yahoo! President Sue Decker noted in Tuesday's conference call that while demand for Yahoo!'s search and performance-based ads were holding strong, its premium display ads were taking a hit as advertisers pulled back on their spending for branding. International display ads were also slowing down far more significantly than expected, she said.

In the third quarter, owned and operated Yahoo! search ads experienced a year-over-year growth of 17%, to $438 million. But display ads grew by only 3%, to $435 million.

Decker said most of the company's ad mix consists of premium display ads, and although some advertisers are consolidating their budgets to the benefit of Yahoo!, the cutback in total spending has proven more detrimental.

As for the search deal with Google(GOOG Quote), which Yahoo! had hoped would generate as much as $800 million in annual revenue, Yang would only say that it was still under review by the Justice Department.