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Updated from 4:42 p.m. EST



president and operating chief, Jeff Mallett, will step down in April, severing another connection with the Internet media company's much-ballyhooed past.

Yahoo! also reported stronger-than-expected fourth-quarter earnings and revenue Wednesday afternoon, and offered a 2002 financial forecast that includes revenue guidance above analysts' prior estimates. Yahoo! shares rose slightly in after-hours trading.

Together with comments made Tuesday evening by Net ad firm


, Yahoo!'s report could give investors some mild optimism about the hard-hit Internet advertising market. Still, Yahoo! said it wasn't counting on a rebound in Web advertising, which has dropped precipitously over the last 18 months, putting countless Web media companies out of business or on life support.

Solid Effort

For its fourth quarter ended Dec. 31, Yahoo! reported pro forma earnings, excluding various expenses, of 3 cents a share, tripling the Wall Street consensus as quoted by Thomson Financial/First Call but falling sharply from the year-ago 13 cents. Revenue fell to $189 million from the year-ago $311 million but handily exceeded the $171 million consensus estimate.

Yahoo! attributed its revenue surprise to two primary factors: One was the conservative nature of the company's economic forecasting in the wake of the Sept. 11 terrorist attacks, which assumed -- incorrectly, it turned out -- that the the fourth quarter's seasonal strength relative to the third would evaporate. The second, said Yahoo!, was quick progress on some of the company's new revenue initiatives, particularly its pay-for-placement search listings supplied by


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. Chief Financial Officer Sue Decker estimated that 40-50% of the revenue growth from the third quarter stemmed from Yahoo! initiatives, with the balance coming from seasonal improvements.

The company, which is attempting to diversify its revenue beyond the advertising business on which it was built, says 75% of revenue came from such marketing services in 2001, and 25% came from transactions or business services. That split should migrate from 75/25 to 65/35 in 2002, Yahoo! says.

Pushing Ahead

For the first quarter of 2002, the company expects to earn a penny or 2 on revenue of $160 million to $180 million. Wall Street expects Yahoo! to earn 1 cent on revenue of $164 million. For 2002, the company forecast earnings of 7 to 10 cents a share on revenue of $750 million to $800 million, against the $735 million forecast.

Those 2002 numbers, said CEO Terry Semel on the company's conference call with analysts, don't assume any rebound in the advertising market. Any such rebound, he said, would be a "blessing."

Yahoo!'s cautious optimism for 2002, in the face of a flat market, is a slight improvement over the outlook of DoubleClick


, the Internet advertising company that announced

its fourth-quarter results Tuesday. DoubleClick is forecasting revenue of $330 million to $400 million for 2002, trending below analysts' prior mean estimate of $388 million.

Don't Hurt 'em, Hammer

Mallett, who has been with Yahoo! since its early days and was its 12th employee, will leave in April "to take advantage of greater flexibility for family and business interests," the company said. His departure follows the arrival of Semel, who was hired April 17, 2001, to speed Yahoo!'s diversification beyond free Internet services into other media businesses.

Yahoo! didn't name a successor and didn't make any other changes to its management structure in response to Mallett's departure, though it said it expects to name a successor before he leaves.

Yahoo! shares dropped $1.60 to $17.87 ahead of the postclose announcement, but they recovered 43 cents, or 2.4%, afterward in after-hours trading.