Yahoo turned in another dismal financial report in the second quarter, with revenue down and earnings flat.

Yahoo sales were $1.04 billion, excluding traffic acquisition costs, with earnings per share of 37 cents. Analysts had expected revenue to be $1.08 billion and earnings to be 38 cents.

Let’s be clear: It is hard in an ever-expanding Web market to do quite this badly. Thus, Yahoo CEO Marissa Mayer did not even try to pretend that the results were other than poor.

“Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results. … I believe we can and will do better moving forward.”

This is the understatement of the year.

On a bright note, Yahoo said it “requested and Alibaba Group agreed to an amendment to the share repurchase agreement that reduces the maximum number of shares that Yahoo is required to sell in connection with Alibaba’s initial public offering from 208 million shares to 140 million shares.”

Yahoo, as everyone knows, owns a large stake in the Chinese Internet juggernaut. (Praise be in Sunnyvale.)

That means it has to sell 68 million fewer shares, which could be worth billions of dollars for the company coffers now that Yahoo gets to hold onto them. Half of what it will sell, said Yahoo in a statement, will go back to its shareholders.

“We would like to take this opportunity to let our investors know that we are committed to return at least half of the after-tax IPO proceeds to shareholders, in line with our overarching commitment to maximizing shareholder value through prudent capital allocation,” said Yahoo CFO Ken Goldman.

In other words, Ken’s buying off investors for a time.

But here’s the rub I have been yammering on about for a long time, which is finally beginning to occur to investors: Yahoo said display advertising — one of its key businesses — dropped seven percent from the year before.

Most rivals are growing, which begs the question of how Mayer can turn around the company and spur growth. She has tried a lot of tricks, none of which has worked as yet.

Except convincing Alibaba to let Yahoo sell fewer shares. That, as it turns out, she gets an A for.




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