With Microsoft's $47.5 billion takeover bid off the table and his company's stock price down 20 percent during his 13-month reign as Yahoo's CEO, Jerry Yang has a message for his exasperated shareholders: Things aren't as bleak as they look.

"This company is doing just fine in a tough economy and a tough environment," Yang told The Associated Press in an interview late Tuesday. "We think there are a lot of good things to come still."

Yahoo Inc.'s second-quarter results didn't provide much reason for enthusiasm.

But at least they weren't as bad as many investors feared after Yahoo spent months sparring with Microsoft Corp. and dissident shareholder Carl Icahn while also trying to cope with a weakening U.S. economy that's make it tougher to sell online advertising _ the company's lifeblood.

"It was a 'rice-cracker' quarter," said Canaccord Adams analyst Colin Gillis. "It didn't taste great, but it wasn't totally horrible either."

Investors changed course quickly on Yahoo on Wednesday, sending the stock down $1.01, 4.7 percent, to close at $20.39. The shares had gone has high as $22.48.

The stock remains below where it stood last week before Internet search leader Google Inc. set off alarms about the state of the online ad market with second-quarter earnings that came in below analyst estimates.

Yahoo letdowns are far more common that the occasional stumble by Google.

The April-June period marks the ninth time in the past 10 quarters that Yahoo's profit has slipped from the previous year.

The company earned $131 million, or 9 cents per share, an 18 percent drop from $161 million, or 11 cents per share, last year.

Analysts had projected earnings of 11 cents per share in the most recent quarter, according to Thomson Financial.

Yahoo's financial erosion has dragged down its stock, leaving it exposed to Microsoft's unsolicited takeover bid and igniting shareholder protests like the one that Icahn had been waging until Yang negotiated a truce Monday.

Icahn, who wanted to fire Yang as chief executive officer, will get a seat on Yahoo's board along with two allies. Eight of Yahoo's current nine directors, including Yang, will retain their positions.

"They dodged a bullet, but the future still looks cloudy," said Carl Tobias, a University of Richmond law professor who has been following Yahoo's wrestling match with Microsoft and Icahn.

Although Icahn isn't breathing down his neck for now, Yang probably won't have much more longer to deliver on his turnaround promises, said James Post, a Boston University professor specializing in corporate governance and business ethics.

"I think he is going to have to take some major strategic action before the end of the year," Post said. "The support Jerry has now seems much more fragile than he has had in the past."

Yahoo shareholders will have a chance to confront Yang Aug. 1 at the company's annual meeting.

Even though Icahn has backed off, some shareholders are still expected to oppose the re-election of Yahoo's current directors to punctuate their dismay with company's struggles. Continued...