Updated from 7:37 a.m. EST

Shares of Yahoo! ( YHOO) rose early Wednesday as investors applauded news that the long-awaited Panama ad system would debut ahead of schedule on Feb. 5.

Shares rose 6.1%, or $1.66, to $28.62 in spite of a soft first-quarter forecast and a Wednesday morning downgrade from Goldman Sachs. It cut the stock to neutral from buy, citing limited upside for the shares given the company's growth rate and competitive challenges.

The new system, a centerpiece of the company's strategy, is intended to help Yahoo! close the gap in the amount of money it makes per search compared with rival Google ( GOOG).

While the launch was already delayed once, it allowed Yahoo! to make sure it would work as smoothly as possible, Yahoo! CFO Sue Decker said in the company's conference call to investors.

"The extra time we took in testing and in deliberate client migration delayed the implementation, but we felt that doing it right was more important than doing it right away and the positive feedback we're getting from clients tells us this was the right decision," she said. Decker added that Panama was built modularly, or in a way that will make it easy for Yahoo! to tie in new features and increase its capabilities in the future.

The stock recently climbed 5.9% in after-hours trading to $28.55.

The Sunnyvale, Calif., Internet company said Tuesday it made $269 million, or 19 cents a share, for the quarter ended Dec. 31. That's compared with $683 million, or 46 cents a share, a year ago. Revenue rose to $1.7 billion from $1.5 billion a year earlier.

Excluding items, the company earned 16 cents a share, beating the Thomson First Call estimate of a 13-cents-a-share profit.

Excluding traffic acquisition costs, revenue was $1.23 billion in the fourth quarter. Yahoo! had forecast sales of $1.14 billion to $1.26 billion. First Call was expecting $1.22 billion.

Excluding traffic acquisition costs, Yahoo! forecast revenue of $1.1 billion to $1.2 billion for the first quarter and $4.95 to $5.45 billion for 2007. The company said it would start seeing financial impact from Panama beginning in the second quarter.

First Call was expecting revenue of $1.26 billion for the first quarter and $5.47 billion for the full year

Investors seem to be more focused on Yahoo!'s ability to execute and get Panama on track than on the company's sluggish guidance. That's because a bet on Yahoo! at this point is more an expression of faith in the company's ability to deliver on its vast, far-reaching network of assets than a move to pick up a battered, bargain stock in the hopes of near-term financial performance.

Despite losing one-third of its value in 2006, Yahoo! is anything but cheap -- it still trades at a forward price-to-earnings ratio of nearly 47, compared with search leader Google's 35.

The key for Yahoo! will be to tie together its media assets in a way that makes it the go-to choice for advertisers. Already the unrivaled market leader in graphical advertising, a segment that recorded a solid showing during the quarter, the company will seek to further its advantage in using its many points of contact with users to cross-sell ads.

"What we offer is the most advertising products and a breadth that is unmatched because of the massive audience we have on Yahoo!," said Decker in an interview. Decker, who will ultimately head up the Yahoo! advertiser and publisher group in the wake of a high-profile management shakeup in December, says the rich data Yahoo! gathers on user behavior across its network can combine with the new Panama system to target ads in a uniquely sophisticated way.

Along these lines, the company also recently extended its push in the mobile space by unveiling a new service that allows users to launch quick searches from their mobile devices. While Yahoo! CEO Terry Semel said in the conference call that it's not clear about when it sees this service starting to impacting its bottom line, the company is betting that driving adoption will put it in a better position to use online data to serve up local and mobile ads.

Yahoo! is gunning for pole position in the rapidly emerging segment in the hope that it will find a way to make big profits later on. The big payoffs will come if the company is able to harness the insights into online user behavior and translate these for fast-growing mobile devices better than anyone else.