Yahoo has reported revenue of US$1.58 billion for the third quarter of 2009, down 12 percent from the same period a year earlier, although net income was up sharply, by 244 percent, the company said.

Yahoo's third-quarter income was $US186 million, the company said Tuesday, up from $US54 million for the third quarter of 2008. Earnings per share was $US0.13, significantly ahead of analyst estimates of $US0.07, according to those polled by Thomson Reuters.

"In the third quarter we saw strength in key areas of our business," Chief Financial Officer Tim Morse said in a statement. "Our efforts to reposition Yahoo are still in the early stages, but we're confident that our investments in the business will enable us to capitalize on growth opportunities as the economy recovers."

The increase in net income was due to a variety of factors, including a slower-than-anticipated growth in hiring and savings in broadband costs, Morse said during a conference call.

Display advertising revenue was down 8 percent for the quarter, but there were double-digit decreases in the first and second quarters of the year. "Things are starting to loosen up," Morse said. "The ad dollars are starting to flow a little better."

Revenue from marketing services, including Yahoo's online advertising business, was down 12 percent from a year ago. Fees revenue, including money paid for services such as music downloads, was down 11 percent.

Cash flow from operating activities was $US355 million, a 2 percent increase compared to the third quarter of 2008. Free cash flow was $US258 million, up 20 percent from $US215 million in the same period of 2008.

Yahoo expects revenue of $US1.6 billion to $US1.7 billion in the fourth quarter, Morse said.

Yahoo, after being courted by Google, signed a search advertising deal with Microsoft in July. The agreement will allow Yahoo to continue to receive search revenue and allow the company to innovate in search user experience, Morse said.

"We'll innovate on top of the search results that Microsoft delivers to us," he said.