Yahoo boosts Q3 with smaller advertisers, pay services

Internet bellwether Yahoo Inc. reported third-quarter earnings that came in slightly above expectations Wednesday, thanks to reduced capital spending and success at targeting small and medium-sized businesses to its marketing platform, the company said.

Yahoo reported net income of US$28.9 million, or $0.05 per diluted share on revenue of $248.8 million for the quarter ended Sept. 30. This compares to revenue of $166.1 million and a loss of one penny per share for the same quarter last year.

The results trumped earning predictions made by analysts surveyed by Thomson Financial/First Call, who forecast earnings of $0.04 a share on revenue of $238.4 million.

Additionally, the company reported free cash flow of $57.3 million for the quarter, compared to $6.3 million during the same period last year. This jump in free cash flow is an important sign of the company's health, Yahoo said, given that it reflects the funds it has available to invest in the business.

Yahoo defined free cash flow as earnings before interest, taxes, depreciation and amortization (EBITDA) plus nonoperating cash income, less taxes paid, investments in working capital and capital expenditures.

In addition to targeting small and medium-sized businesses with its marketing offerings, Yahoo has worked to raise its revenue in recent quarters by introducing new premium services, such as search, Web hosting and broadband offerings. Additionally, Yahoo has inched further into the corporate market, introducing a new enterprise instant messaging (IM) product earlier this week.

Shares in the Sunnyvale, California company closed up 4.4 percent to $9.93 before the results were released Wednesday.

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