A year into Jerry Yang’s turnaround strategy – and 10 days before a potentially ear-boxing stockholders meeting – and Yahoo has produced second-quarter results that missed Wall Street’s reduced expectations.

And, as the AP observed, its market value is now about $18 billion below Microsoft’s last offer.

Q2 earnings were down 18% year-over-year to $131.2 million, or nine cents a share, on revenues up 6% to $1.8 billion but after subtracting the traffic acquisition costs (TAC) it pays partners revenues were only $1.35 billion, $20 million-$30 million short of expectations.

Yahoo’s Q2 operating income was off 45% to $101 million, clipped in part by the $22 million it spent on advice on how to fend off both Microsoft and corporate raider Carl Icahn, trimming earnings by a penny.

The total spent warding off Microsoft is now $36 million.

Yahoo bought off Icahn’s sputtering proxy battle Monday by giving him three seats on an expanded board.

US revenues during the quarter were up 13% to $1.27 billion; international took an 8% dive to $534 million apparently because of a change in accounting.

Yahoo pronounced itself “pleased” with the Q2 results given the economy and the Microsoft/Icahn distractions and claimed its “transformation gained momentum.” Everybody else apparently took solace in the fact that things weren’t worse.

Yahoo said advertising in sectors like finance, travel, automotive and retail was soft. Brand advertising also weakened in favor of performance ads. Search queries were up 11% in the quarter.

The company narrowed its guidance for the full year, raising the bottom and lowering the top to between $7.35 billion and $7.85 billion (including TAC). Previously it was $7.2 billion-$8 billion.

The guidance leaves out any revenue contributions Google might make since Washington is reviewing the deal.