03:01 AM

1.24.07: YHOO profit in toilet, stock up

Yahoo profits dropped 61 percent for the fourth quarter, the company reported yesterday. Profits came in at a meager $269m compared to $683m a year ago. Oddly enough, YHOO shares are up roughly 7.5% to roughly $29 per share this morning. The excitement seemed to be centered on Panama, Yahoo's new advertising system that brings it rougly into parity with Google's. Here's The Street's Vishesh Kumar:

Yahoo! management exuded confidence when talking about Panama late Tuesday, with CEO Terry Semel noting that the majority of Yahoo!'s U.S. advertiser revenue has already been transitioned to the system, and that the company will begin introducing the new system into international markets starting with Japan during the second quarter.

The extra time that Yahoo! took in rolling out the new system was well worth it given its quality, CFO Sue Decker said, and the platform was put together in a way that would make future upgrades simple. Given that the system will learn which ads are more effective than others over time, Yahoo! expects the bottom line impact to grow over time.

Notes the Washington Post:

One particularly troubling trend to Yahoo watchers is that the company is starting to lose its footing in display advertising, one of its strongest businesses. Yahoo, with 500 million users, still has the heaviest traffic of any Web site, but Kessler said popular social-networking sites such as MySpace and Facebook are cutting Yahoo's traffic and revenue growth.