Yahoo’s Q2 profit rose compared to the same period last year, but revenues fell by 5%. The decline has been attributed to the company’s reorganization of its sales department earlier this year.

“We underestimated how much the changes would increase turnover,” said Yahoo CEO, Carol Bartz. “We didn’t have enough salespeople in front of big clients.”

The rise of Yahoo’s profits, on the other hand, is due to the company’s cost-cutting measures that were implemented at the start of the quarter. Yahoo reduced its total operating expenses to $700 million from $743.3 million in Q2 last year. This resulted in a rise in net profits to $237 million from $213 million during the same period last year.

Chief Financial Officer Tim Morse said that Yahoo had the ad inventory to sell premium rates however the reorganization has impacted the ad revenue. This quarter has been highlighted with two major events which increased internet traffic. The royal wedding ranked as the sixth biggest event in web history, generated 400 million views. The death of Osama Bin Laden generated 900 million page views on Yahoo news, with 50 million video streams and 500 million photos viewed.

Yahoo’s revenue sharing deal with Microsoft is also a contributing factor to the decline of the company’s revenue. The partnership didn’t immediately take off due to unexpected difficulties in combining their services. Yahoo and Microsoft have a combined 30% share of the search market compared to top rival, Google, which has 65.6%.  However, Yahoo has been optimistic, and is looking to see revenue improvements by the end of the year.

Another unresolved issue that Yahoo needs to address is the current negotiations with Chinese Internet giant Alibaba Group, in which Yahoo holds about a 40% stake. Alipay, a Chinese online payments group by Alibaba, has been transferred to a company owned by Alibaba CEO Jack Ma, without informing the shareholders, or even the board of directors. Yahoo is still asking compensation for the transaction.

“We’ve been working on this agreement continuously, in fact, daily,” Bartz said.