Yahoo's profit falls by 22%

Yahoo quelled investor worries that it was losing market share and momentum, reporting first-quarter revenues on Tuesday that rose 34 percent from a year earlier as Internet advertising continued to grow.

Profit, however, slumped 22 percent, reflecting higher costs, particularly for employee stock grants.

The results cheered investors who had been worried about reports by market-research firms that Yahoo was steadily losing ground to Google, the leader in Internet search.

Following the earnings announcement, Yahoo's shares surged $1.92 a share, or more than 6 percent, in after-hours trading to $33.22 a share. In regular trading, Yahoo had closed at $31.30, down 28 percent from a high in early January.

Google, which will report financial results Thursday, rose nearly 3 percent in after-hours trading after falling 0.6 percent during the day.

In a conference call with investors, Yahoo Chief Financial Officer Susan Decker said the number of searches in the quarter had grown 15 to 20 percent compared with the previous year. She noted that Yahoo's advertising revenue associated with each U.S. search was up 5 to 10 percent.

Overall, Yahoo's revenues increased to $1.57 billion, up from $1.17 billion a year earlier.

Net income dropped to $160 million or 11 cents a share, compared with $205 million, or 14 cents a share, a year earlier. The company recorded a $71 million expense for stock compensation, compared with a $6 million expense a year ago.

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*Hrmm, hope they get better soon.