(YHOO - Get Report) reports its second-quarter results Tuesday as talk of a possible
(MSFT - Get Report) deal again resurfaces.
Yahoo! board member Carl Icahn has
again been urging the Internet firm to forge a search deal with Microsoft, and there have also been
rumblings that senior Microsoft executives are on board.
Last year Microsoft launched a $47.5 billion bid for Yahoo! that ultimately collapsed, although there is growing speculation that the firms will now reach some
form of search deal.
"The company's long-term prospects remain positive due to management focus on streamlining the business, Yahoo's intrinsic asset value and a potential partnership with Microsoft," wrote Youssef Squali, an analyst at Jefferies & Company, in a note released this week.
AT&T and Yahoo! Need New Mojo
Yahoo!, which is
a new homepage today , is currently locked in a battle with rival
Internet hearts and minds.
Given the state of the economy, however, Squali expects Yahoo! to post "muted" second-quarter results, with both search and display advertising under pressure from macro headwinds.
Yahoo!'s Owned and Operated (O&O) search business will show a mid-single digit year-over-year decline, according to Squali, thanks to stiff competition from Google. The firm's display business will also feel the effects of pricing and volume pressure and cuts in branding budgets, he added.
Analysts surveyed by Thomson Reuters expect Yahoo! to post revenue of $1.14 billion and earnings of 8 cents a share, down from $1.8 billion and 9 cents a share in the same period last year.