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Yahoo CEO Marissa MayerROBERT GALBRAITH/Reuters

Yahoo Inc. posted a 4 per cent gain in net revenue to $1.22-billion (U.S.) in the fourth quarter, when an increase in search advertising sales offset weakness in the Web portal's display ad business.

The company forecast net revenue - which excludes fees shared with partner websites - of $1.07-billion to $1.1-billion in the current quarter, trailing the $1.1-billion that Wall Street analysts expect on average.

Shares in Yahoo, which is trying to stave off declines across much of its business and revive growth, were up 1.5 per cent in after hours trade. They had risen 4.5 per cent before the revenue projections were disclosed on an analysts' conference call.

"We got the revenue acceleration we were hoping for. Display was down, but search is doing better" said Sameet Sinha, an analyst at B. Riley Caris.

"As long as in the near-term things are not bad, I think the stock will generally act positively while we wait for Marissa Mayer to deliver," said Sinha.

The company said on Monday its fourth-quarter net income was $272.3-million, or 23 cents per share, against $295.6-million, or 24 cents per share in the year-ago period.

Excluding certain items, Yahoo said it had earnings per share of 32 cents, against the average analyst expectation of 28 cents according to Thomson Reuters I/B/E/S.

Chief executive officer Marissa Mayer is moving to revive the company's fortunes after several years of declining revenue. Yahoo's stock has risen roughly 30 per cent since she became CEO, reaching its highest levels since 2008.

Yahoo said it repurchased $1.5-billion worth of shares during the fourth quarter. Shares in the company were up 1.5 per cent at $20.61 in extended trading from a close of $20.31 on the Nasdaq.

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