Investors looking for clearer signs of stability may find only more uncertainty in Yahoo!'s ( YHOO) first-quarter results, due after the market closes Tuesday. Even though rival Google ( GOOG) posted a strong first-quarter performance last week, Yahoo! may not have enjoyed the same fortunes. And if the numbers are disappointing, you can probably expect some loud grumbling over CEO Carol Bartz's priority to rebuild Yahoo! rather than strike a search deal with Microsoft ( MSFT). While most analysts aren't expecting weak Yahoo! numbers, some have found reason to expect a slight shortfall. First-quarter revenue from Yahoo!'s paid search business slipped 5% below the prior quarter, wrote Majestic Research analyst John Aiken in a research note Friday. That sequential decline is steeper than Google's drop and below the 2.5% decrease analysts are expecting. Yahoo!'s banner ad sales, the revenue engine that once propelled the Internet giant to pre-Google dominance, fell 26% below fourth-quarter levels, Majestic's Aiken wrote. That is weaker than the 24% slide Wall Street is bracing for. Analysts expect Yahoo! to post an adjusted profit, excluding one-time items, of 8 cents a share on $1.2 billion in sales for the quarter ended last month, according to Yahoo! Finance. And looking ahead, analysts are expecting a small sequential increase with a 9-cent pro forma profit on revenue of $1.22 billion. Not all the early signs are bleak, however. In the March comScore report released to analysts last week, Yahoo! was able to hold on to its share of the search business. The report showed that Google had 63.7% of the market, compared with Yahoo's 20.5% and Microsoft's 8.3%.
Yahoo! shares are up 17% so far this year, largely on hopes that Bartz can lead the company to a recovery or at least forge a search deal with Microsoft to better defend itself against Google.