SAN FRANCISCO: Yahoo Inc's third-quarter forecasts fell short of Wall Street expectations, sending shares 3.2 percent lower, as the Internet company announced plans to step up spending despite persistent weakness in the advertising market.

Chief Executive Carol Bartz said Yahoo was hiring more engineers and sales and marketing staff as it invests in new products and branding - a reversal from the cost cuts the company embarked upon in past months.

Bartz, on a conference call, said the company was committed to bolstering its profit margins in the long run. But in the near term, she said, "there are things we've got to get done and a lot we don't control in this economic climate".