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Yahoo to spend more after cost cutting

CAROL Bartz has already shown off her cost-cutting skills in her first six months as Yahoo Inc's chief executive.

Now, she will try to prove she isn't making a bad bet by spending more money while the Internet company's advertising sales are still sagging.

The risky strategy caused investors to fret more about what might happen in Yahoo's third quarter than to celebrate the 8 percent increase in second-quarter profit reported on Tuesday. It marked Yahoo's first quarterly earnings improvement since the start of 2008, but Yahoo shares nevertheless slid 45 cents, or 2.7 percent, to US$16.30.

The Sunnyvale, California-based company wouldn't have boosted its second-quarter profit if not for layoffs and other cost cutting that pared operating expenses by nearly US$150 million, or 15 percent, from last year. The savings enabled Yahoo to shake off the biggest drop in its ad revenue since the dot-com bust at the beginning of the decade.

But Bartz raised questions about whether the earnings momentum will continue by vowing to spend at least US$75 million more promoting Yahoo's brand, hiring more engineers and improving some of its services during the third quarter.

On top of that, Yahoo expects to surrender about US$75 million in revenue by reducing the volume of ads identified as being "too obnoxious."



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