Yahoo headquarters shown in Sunnyvale
Kohlberg Kravis Roberts and Blackstone Group would join other private equity giants like Providence Equity Partners and Silver Lake Partners in attempting to acquire Yahoo. REUTERS

Global Equities Research has reduced its profit and revenue estimate of Yahoo Inc. (NASDAQ: YHOO), saying the Internet firm is still losing advertising dollars on display and search properties to Google and other sites.

The brokerage cut its third-quarter GAAP earnings view by 3 cents to 15 cents a share and revenue forecast, excluding traffic acquisition costs, by $36 million to $1.04 billion, representing a decline of 48 percent and 7 percent from last year, respectively.

Wall Street expects Yahoo to earn 17 cents a share on revenue of $1.07 billion, according to analysts polled by Thomson Reuters.

For fiscal 2011, the brokerage now expects GAAP earnings of 66 cents a share on revenue of $4.26 billion, representing a drop of 26 percent and 6 percent from last year. Earlier, it expected earnings of 68 cents a share on revenue of $4.31 billion.

Analysts estimate earnings of 74 cents a share on revenue of $4.43 billion for 2011.

Our research indicates that Yahoo today is in much weaker position than before and the company fundamentals continue to deteriorate. Yahoo continues to lose ad-spend on its display and search properties, Global Equities Research analyst Trip Chowdhry wrote in a note to clients.

The brokerage, which spoke to no less than 25 eMarketers, said that display ad-spend on Yahoo premier properties is probably down 3 percent to 5 percent sequentially, with ad-spend shift happening to user-generated content versus branded content.

Converged view is that eMarketers are shifting their display ad-spend from Yahoo premier properties including Yahoo home page into experimental category, Chowdhry said.

The following are the experimental categories where the display ad-spend shift from Yahoo is happening:

* Facebook Fan Pages

* Google YouTube

* Social Games

The Ad-Spend shift away from Yahoo Display is probably irreversible, as eMarketers feel user-generated content provides better micro-targeting and monitoring of their digital marketing campaigns, wrote Chowdhry, who has a price target of $12 on Yahoo stock.

Shares of Sunnyvale, California-based Yahoo closed Wednesday's regular trading session at $14.19 on Nasdaq.

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