On The Call: Yahoo CEO Carol Bartz

Yahoo sometimes confuses analysts by lowering its expenses only to wipe out some of the savings by increasing spending later. It looks like that is about to happen again. Cost-cutting helped Yahoo boost its second-quarter profit by 8 percent despite another drop in the company's ad sales. Now, Yahoo is gearing up to increase its third-quarter spending by at least $75 million promoting its products, improving its technology upgrades and hiring more engineers.

CEO Carol Bartz, during a Tuesday conference call with industry analysts, reasoned the short-term costs will be worth the long-term benefits.

QUESTION: You have drained some buckets (of expense) and you're putting money in a new bucket. How should we think about the yearly cost structure of the company if the revenue stays flat?

RESPONSE: You look at two factors. One is the economy, which seems to be, as we said, bouncing along, perhaps not getting worse but someday will get better. I think we all want to certainly believe that.

If you also look at the whole trend of ad spending and that it will shift online, so we have that factor going for us. There is certainly reason to believe that the revenue will not stay flat forever. I certainly believe that and I know your next question will be, 'OK, then Carol, exactly when is it going up?'

But of course I won't answer that. But it won't stay flat forever and we really do believe by the way that these investments we're making will actually make us more efficient both on the product side and some of the process investments. So we actually believe there's a time where we get efficiency inside the company.

So we're going to get efficiency, we think revenue is going up. So that's a reason we have the guts here to make this investment now, and pull these margins down, as you say, because we think for the long term, we're running a good company doing that.