2008 was a rough year for Yahoo. First Microsoft tried to acquire them, then Yahoo spurned them, then shareholders wanted a merger, then they lost CEO Jerry Yang, then their search ad deal with Google fell through. There was nowhere to go but up in 2009, right? We got a new CEO, Carol Bartz, and Yahoo finally looks like its making an effort and has a new search ad deal with Microsoft in the works.

But in some ways, theyre wishing for the old days"the Q3 report today says that the company has seen a year over year drop of 12% in revenues (to $1.575B). Theyve also seen a drop in operating cash of 6% ($384M). Considering last years Q3 was rough (although even then, their revenues were up), even lower revenues this year isnt exactly what they wanted to hear.

But the Q3 report has good news, too. While revenues fell, net income was up an amazing 244% (to $186M). (I know, that kind of growth makes you think creative accounting.)

Carol Bartz has been cracking down on the company and trimming the fat, one of the tasks she was brought in to do. Even with lower revenue, they ended up with a substantially higher net income"thats pretty darn good.

Of course, theres still one big question here"will a search deal with Microsoft help Yahoo where its struggling in the long run? Well, since the deal currently says that their revenue/search must match Googles, theres a big maybe on that one. Yahoos notoriously suffered from a lower revenue per search, something theyve tried to ameliorate with now two search deals. Will this be the one to do it"and will that be enough to turn the company around?

What do you think? Is this more good news than bad news for Yahoo? Will a partnership with Microsoft reverse their revenue fortunes?

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