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Yahoo!'s Direction Key For Shareholders

NEW YORK ( TheStreet) - Even though the plan to turn Yahoo! (YHOO - Get Report) around has been laid out, it will take plenty of time to fix the company. The company's first-quarter earnings may offer a glimpse of what's to come.

Following weak fourth-quarter numbers earlier this year, led primarily by tepid advertising sales, Yahoo! is attempting to turn its business around by focusing more on its customers.

Earlier this month, CEO Scott Thompson released a letter outlining his plan to restructure Yahoo! into three divisions: Consumer, (which is comprised of Media, Connections and Commerce), Regions, which targets emerging markets, and Technology, which focuses on the company's infrastructure.

Investors will also be looking for detail on Yahoo!'s recently-announced layoffs during the company's first-quarter conference call, as well as any hints of additional cuts.

J.P. Morgan analyst Doug Anmuth notes that investor focus is less likely to be on the quarterly results, and more on Thompson's plan to turn the company around. "Following the round of layoffs and the reorg, we believe investors are focused on Scott Thompson's strategy for the business. We know he's focused on the core business, improved data and targeting functionality and fee-based revenue, but we've heard only limited details thus far," Anmuth wrote in a research report. The analyst rates Yahoo! shares "neutral" with a $17 price target.

Eric Jackson, president and founder of Ironfire Capital, believes Thompson will give investors light on what his plan is to save the company. "Yahoo! has a low bar to jump over, in terms of earnings," he said, over the phone. "They've been able to meet expectations recently, but I suspect [the results] will be more about what Thompson has to say about the future than the immediate term numbers."

Jackson is long Yahoo! and has been adding to his position in recent weeks.

Bernstein analyst Carlos Kirjner notes that the plan could be subject to execution risk, given "it is unclear how much 'surgery' will be required to dismember and redistribute the product development organization across the different groups within Consumer," he wrote, in a research report. "The fact that the company appointed an executive to program-manage the transition suggests some non-trivial unwinding lays ahead." Kirjner rates Yahoo! "market perform" with a $17 price target.
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