Showtime for Yahoo's Bartz

Earlier this week, as she prepared for her first shareholder meeting as CEO of Yahoo, Carol Bartz told a story about her favorite question she ever received at a shareholder meeting while at Autodesk: "Why, young lady, are you qualified to keep your job?"

Bartz is unlikely to face such a question Thursday, just six months after assuming the top role at Yahoo following one of the most tumultuous years in the company's history. Bartz has shaken up Yahoo in her short time on the job; bringing in her own people with a cost-cutting mandate, putting the fear of God into the engineering team, and charming the business press with interview performances that call to mind what might have been the result if Lucille Ball and George Carlin had raised a techie daughter.

But shareholders will arrive at the Santa Clara Marriott with a key fact in mind: despite the relative calm of 2009 compared to the maelstrom of 2008, Yahoo seems to have little to show for the stability.

Revenue, earnings, and the all-important stock price are down from that tumultuous year; and even though the economy provides an understandable excuse, Yahoo's margins are still very thin, despite rounds of layoffs.

During its first fiscal quarter, Yahoo earned just $101 million in operating income on revenue excluding commissions of $1.16 billion. By contrast, Google earned $1.88 billion in operating income on revenue excluding commissions of $4.07 billion and AOL earned $150 million in operating income on revenue of $867 million.

How to turn things around? It seems Bartz is preparing to articulate a different vision of Yahoo than others have been used to hearing from those in purple. For example, she has suggested that search is not the be all and end all for Yahoo; an anathema to the establishment.

Instead, she has talked about acquiring social-networking companies and doubling down on attempts to court major advertisers to Yahoo's popular properties. Financial analysts love Bartz right now for her willingness to swing the hatchet on costs, and shareholders are likely to share an appreciation for her quest to get under some semblance of control.

The "it was like that when I got here" strategy only works for so long, however. Shareholders are likely to press Bartz on the chances of any kind of a deal with Microsoft, given that Yahoo's stock has languished far below Microsoft's best offer of $33 a share for the entire company last year. Heading into Thursday's meeting, it closed at $15.45.

Bartz has thus far been coy about her dealings with Microsoft, acknowledging that talks have taken place while insisting that Yahoo is a viable business on its own. A straight-out acquisition by Microsoft seems unlikely now, given the economic climate, but a search partnership does not appear out of the question.

However, the cost savings once thought to accompany such a partnership are less than many had thought, Bartz warned a few weeks ago. Some had thought Yahoo could save as much as much as $1.3 billion by agreeing to let Microsoft run its search-ad business, but Bartz put the figure at roughly $500 million in June.

If Bartz hangs onto Yahoo's search business, she'll need to explain how Yahoo can jump-start that portion of its revenue-generating strategy. Bartz has admitted that few people who aren't already on one of Yahoo's sites choose its search--98 percent of all Yahoo searches come from people already on Yahoo. That's still a lot of people, but with Google being Google, and Microsoft recording early success with the launch of Bing, Yahoo seems to be fading from the public's mind as a search option.

Still, Yahoo is the second-largest Web property in the U.S., and a revamped home page coming later this year might help draw more people onto the site, and therefore generate more searches and more impressions on display ads. Bartz seems to be hoping that a slimmer, more attractive Yahoo will gain traffic just as the advertising market hopefully comes back later this year and into next.

Thursday, she'll find out what shareholders think.