Yahoo, owner of the second-most popular U.S. search engine, reported a fourth-quarter loss yesterday after shrinking demand for online ads led to the company’s first sales decline since 2001.

The loss was $303.4 million, or 22 cents a share, compared to a profit of $205.7 million, or 15 cents, a year earlier, the Sunnyvale, Calif.-based company said. Excluding fees passed on to partner sites, sales were $1.38 billion, down 2 percent from $1.4 billion in the year-ago period. Analysts had estimated revenue of $1.37 billion on average, according to a Bloomberg survey.

Carol Bartz, Yahoo’s new chief executive, faces the challenge of reviving growth during a recession. The company has lost Internet-search customers to Google and sales are slowing for so-called display advertising, such as banner ads. Bartz took over from Jerry Yang, who stepped down after the rejection of a $47.5 billion takeover offer from Microsoft rankled investors last year.

“When the economy’s in a downturn, the big brand advertisers pull their advertising budgets. They tend to go down very quickly,” said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co. in New York. He expects the stock to perform in line with the market.

Source: WashingtonPost – By Brian Womack