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Yahoo flexes muscle, tops &#039whisper number&#039

Yahoo! Inc. (Nasdaq: YHOO) kicked off earnings season for Internet companies with impressive third quarter results Wednesday and even beat Wall Street's pesky "whisper number."

The company (chart) reported third quarter operating earnings of $40.4 million, or 14 cents a share, on revenue of $155.1 million. Shares of Yahoo jumped in aftermarket trading.

First Call consensus called for a profit of 9 cents a share.

In the same quarter a year ago, Yahoo reported operating earnings of $6.9 million, or 2 cents a share, on sales of $66.3 million. In the second quarter, Yahoo (financials) reported operating earnings of $27 million, or 9 cents a share.

Including charges related to the acquisition of, Yahoo reported a profit of $14.86 million, or a nickel a share. The company also had $791 million in cash at the end of the quarter and no debt.

Strong traffic growth

Yahoo showed its clout by growing its audience despite a seasonally slow period and had a "pretty steady ramp" of traffic.

Page views for the portal topped 385 million page views a day, which was well ahead of projections and ahead of 310 million page views per day in June.

Yahoo had more than 105 million unique users in September and registered users jumped to more than 80 million. Reach among home and work users increased to a record 63.7 percent in August.

Internationally, Yahoo Japan's traffic jumped to more than 33 million page views per day on average, compared to more than 22 million page views per day in June.

What analysts were expecting

For perspective, here's what analysts were expecting from Yahoo. Wall Street was expecting revenue between $137 million and $140 million. Page views were estimated to be about 357 million page views per day (up 15 percent sequentially) with about 90 million unique visitors. Registered users were expected to be in the 65 million range. However, analysts were off-the-record projecting revenue as high as $150 million with earnings in the 11 cents a share to 12 cents a share range.

Playing the game

Despite the strong numbers, Yahoo officials tried to talk analysts down from going bonkers with their fourth quarter expectations.

"How are you going to talk us down from increasing our numbers for the fourth quarter?" asked an analyst.

"You can always fault me for being conservative," said Tim Koogle, CEO for Yahoo, on an analyst conference call. "We'll continue to be conservative as we find the right level of investment in the company."

E-commerce a growing focus

Although much of Yahoo's business is advertising based, officials said the company is becoming more of an e-commerce player.

Jeff Mallett, chief operating officer, said Yahoo enabled $100 million in transactions via its auction, shopping and other commerce-related sites.

Koogle said the company is evaluating whether to take a piece of transaction revenue for the 7,000 merchant sites it hosts. (Nasdaq: AMZN) is currently taking a chunk of transaction revenue with its zStore initiative.

Koogle also said it could start charging a fee for its auctions, something eBay Inc. (Nasdaq: EBAY) has had success with. Yahoo auctions are nearing critical mass with 900,000 listings.

Koogle said moves to grab more of the transactional pie are under review. "We are on the path to flipping that switch," said Koogle.

Meanwhile, the advertising and direct marketing business looks strong for Yahoo. Mallett said the company has a strong profile database from its registered users.

The company had 3,150 advertisers in the third quarter, up from 2,800 advertisers in the second quarter. Officials also said ad rates were increased.