Yahoo suffered a 19 percent drop in quarterly profit and net revenue, failing to meet Wall Street expectations of $1.37 billion. It also missed Thomson Financial's consensus earnings estimate of 11 cents.

Net income for 2Q08, with one-time charges subtracted, fell to $139 million — 10 cents a share — compared with $161 million (12 cents a share) in 2Q07. Revenue, minus payments to ad partners, rose eight percent, to $1.35 billion, from last year. Gross revenue increased six percent to $1.7 billion.

Growth slowed in brand advertising, but Yahoo President Sue Decker insisted Yahoo made headway in remnant display advertising through the Right Media Exchange, having increased display ad volume annually by 12 percent. Amp is purportedly also doing well: the San Francisco Chronicle and San Jose Mercury News are testing the system. It will roll out to other newspapers in Q3.

Search revenues increased 19 percent, resulting from growth in query volume and revenue per share. Decker took pains to point out Yahoo is serious about competing in the search sector, ticking off new platforms like Search Monkey and BOSS, as well as its potentially lucrative sponsored search liaison with Google.

Given its ongoing battle for control against Microsoft and Carl Icahn, things could have been worse, observes Jeffrey Lindsay analyst Sanford C. Bernstein (via the Los Angeles Times). "It was a disappointment," he said, "but people were fearing a disaster."

This week Yahoo and maverick investor Carl Icahn made a deal in which Icahn joins Yahoo's board and selects candidates for two other board seats. The devil's pact enables Yahoo to avert a likely board ousting attempt by both Icahn and Microsoft during its annual shareholders meeting on August 1.

"We are executing and delivering against the strategy we laid out, even under extraordinary conditions," CEO Jerry Yang said in a conference call yesterday.

Yahoo shares went up two percent to $21.86 after trading hours yesterday. In a broad stroke of irony, last week Google's shares toppled eight percent after it reported a Q2 revenue increase of 39 percent over last year.