Yahoo!'s Revenue Decline Continues (Update 1)

Updated from 4:49 p.m. ET with comments from the company's conference call.

NEW YORK (TheStreet) -- Yahoo!(YHOO) shares dropped 0.6% to $15.60 in after-hours trading on Tuesday after the company said its adjusted revenue fell 3% during the fourth quarter because of weak display ad sales.

The struggling Internet giant, which has been trying to stave off competition in the online ad space from rivals Facebook and Google(GOOG), is trying to turn itself around under new CEO Scott Thompson. Thompson joined Yahoo! earlier this month from PayPal.

The company reported adjusted earnings of 24 cents a share, which was flat from last year. Revenue excluding traffic acquisition costs, or TAC, came in at $1.17 billion.

Analysts were expecting earnings of 24 cents per share on revenue of $1.19 billion in the period.

Display advertising -- Yahoo's core business which includes graphic ads like banners, interactive media and video -- fell 4% during the quarter to $546 million. This compares to overall growth in the U.S. display advertising market to $14.8 billion in 2012, up from $12.3 billion in the prior year, according to eMarketer.

"The very highest priority is to have that business going into the right direction," Thompson said during a conference call with analysts.

Thompson called data Yahoo's "most underappreciated asset" and said it will be a key component to growing the company.

M&A is also expected to be an important part of Yahoo!'s strategy going forward, Thompson said, and the company intends to be "fairly aggressive" with its investments.

CFO Timothy Morse told analysts the company is in "active discussions" with its Asian partners about a potential sale, but didn't provide more detail.

"We're pursuing these discussions with enthusiasm but we're not in a position to provide further detail or certainty on this call," he said.

Yahoo! owns a 40% stake in Chinese e-commerce giant Alibaba as well as a 35% chunk of Yahoo! Japan worth a reported $17 billion. The company is under pressure to unload these assets as a way to return cash to shareholders.

For its fiscal first quarter ending in March, the company expects revenue excluding TAC to range from $1.025 billion to $1.105 billion, which would be a sequential decline. Wall Street's current consensus estimate is for revenue of $1.078 billion in the March-ending period.

--Written by Olivia Oran in New York.

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