Yahoo reported weak top-line performance as expected, while on a sequential basis, revenues point towards a recovery in advertising budgets. Global economic parameters indicate a recovery in the global economy. The US online advertising market, which experienced a sequential decline, is expected to experience a moderate drop in advertising revenues in FY 2009. Going forward we continue to anticipate a recovery in the global economy by 2H 10, which will improve online advertising not only in the US but also worldwide. With Yahoo's worldwide presence in online advertising space, it has a competitive advantage capturing major advertising budgets when the economy recovers. Yahoo's search space is loosing market share to Google but the rate of decline is expected to slow down after Yahoo and Microsoft Inc's search agreement in a bid to challenge Google's dominance. The partnership which is expected to take effect from FY 2010, has received strong support from the advertising industry, which is expected to benefit Yahoo in the long run. Moreover Yahoo's focus on global brand marketing campaign which began in the month of September and its initiative to improve e-mail and instant messaging will drive ad revenues. Stabilization in the global economy has also triggered higher allocation of advertising budgets from large companies. The company’s initiatives to reposition its brand through the launch of a new social networking orientated home page will improve user base. In addition, branding campaigns to focus on small and medium enterprises along with pushing display models in domestic advertising illustrates long term benefits in terms of growth and profitability. Hence at current levels, taking into account the positive fundamental factors as well as anticipated further recovery in the global economy, we maintain our BUY rating on the stock.

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