After one year as CEO: Can Marissa Mayer engineer Yahoo comeback?

SAN FRANCISCO -- No question Marissa Mayer has star power. But can she lift Yahoo out of its doldrums?

One year ago the aging Internet laggard’s fortunes suddenly seemed brighter: It recruited the prominent Google executive. Overnight, Yahoo was splashed across headlines: not for its past foibles and failures, but for new hope that it could stage a comeback.

But in attempting to make Yahoo cool again, Mayer faces a central challenge that stumped all of her predecessors: how to put an end to the steady, years-long decline in advertising revenue and the daily drubbing from competitors Google and Facebook.

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Investors will be looking for any clues to Mayer’s progress on Tuesday with Yahoo’s second-quarter earnings report.

The report is expected to show Mayer is making progress, albeit slow, in her pledge to kick-start revenue growth at Yahoo. She has described Yahoo’s revival as a “series of sprints� that could take years, and she has asked investors to be patient.

They may have to be. Yahoo’s second-quarter revenue isn’t expected to budge much from results a year earlier.

“We expect display [advertising] to remain soft as Yahoo’s sales restructuring could take time to ramp, competition is increasing, and the company has reduced some inventory on the home page and in email,� J.P. Morgan analyst Doug Anmuth wrote in a research note.

He projects “slight� growth in the second half of 2013.

Overall, analysts forecast earnings of 30 cents a share on revenue of $1.08 billion after subtracting ad commissions.

A year ago, Yahoo earned 18 cents a share on revenue of $1.08 billion after subtracting ad commissions. If not for certain charges, the company would have earned 27 cents a share.

What has been on the rise: Yahoo’s stock, which has been trading around $27, up more than 70% since Mayer took over.

Why? The stock has gotten a big boost from the company’s stake in Alibaba, the fast-growing Chinese Internet company.

“This week’s operating results from Yahoo are unlikely to offer much significance to Yahoo’s stock, as most investors remain focused on Yahoo’s 24% stake in Alibaba, which accounts for $10 per share by our estimates,� Pivotal Research Group analyst Brian Wieser wrote in a research note.

Last year, Yahoo reaped $7.6 billion for selling nearly half its stake in Alibaba. The remaining stake could bring in $20 billion within the next few years, estimates Macquarie Capital analyst Ben Schachter.

Alibaba’s worth doesn’t say much about Yahoo, or its potential for a turnaround. But all that cash has helped Mayer go on a shopping spree. She has bought 16 companies so far, including the blockbuster $1.1-billion acquisition of Tumblr. She has also killed off a lot of Yahoo products to get the company more focused on the future (i.e., it’s all about mobile).

BGC Partners analyst Colin Gillis is pouring a jug of ice cold water on Yahoo ahead of earnings with his research note/investment haiku: “Let’s count the reasons, why shares of Yahoo are ripe, to stage a pullback.�

In all, he has 10 reasons, but chiefly, he wrote, the core business continues to struggle “significantly.�

“As an example, the number of display ads sold have declined seven straight quarters year-over-year, and last quarter the price per display ad also declined,� Gillis wrote.

He’s not even high on the Tumblr acquisition. “We view that $1.1 billion for billions of pages of lower quality content and a user base that may push back against advertising may prove difficult to monetize,� he said.

And, for all the high expectations of Mayer, her efforts -- at least so far -- have not had the desired effect on how consumers perceive Yahoo, according to YouGov’s BrandIndex.

In fact, Yahoo is viewed in a less positive light than it was when Mayer took over, reports YouGov, which tracks changes in how consumers perceive brands.

Most damaging to Yahoo: Revelations in June that Yahoo and other Internet companies were turning over user information to a secretive program run by the National Security Administration.

Another factor that temporarily dented the company’s reputation? Mayer’s now infamous telecommuting ban.

Mayer may make up for that ban with a new wristband. All Things D’s Kara Swisher reports that Mayer isn’t just giving her employees free gourmet food at the office. Now she’s adding a new perk: Jawbone UP fitness wristbands for more than 11,000 employees.

The bands retail for $130 and are similar to Nike’s FuelBand or Fitbit’s Flex. (The bands come in eight colors, but no Yahoo purple. Now that Mayer has joined Jawbone’s board, that may change.)

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