Yahoo Inc. (YHOO) Chief Financial Officer Tim Morse vowed Wednesday to boost the Internet company's operating margins to 15%-20% by 2012, up from an estimated 6% this year, as the struggling company tries to regain the respect of Wall Street.

Yahoo also said it had agreed with Microsoft Corp. (MSFT) to extend the period to negotiate the Internet search pact the two companies announced in July.

"Given the complex nature of the transaction, there remain some details to be finalized," said Yahoo in a regulatory filing. "The parties are working diligently on finalizing the agreements, have made good progress to date, and have agreed to execute the agreements as expeditiously as possible."

A Microsoft spokesman said both companies are optimistic the deal will still close by early 2010.

Morse and Chief Executive Carol Bartz told Wall Street analysts that Yahoo would achieve its operating margin targets through a combination of revenue growth and cost efficiencies, but they declined be more specific.

"You either better be growing or you better be profitable," said Bartz, who made her comments during the company's Analyst Day event webcast.

Bartz earlier in the day said Yahoo's estimated 6% operating margin this year was "unacceptable" and she vowed to regain the respect the company has lost over the past several years.

"Today is the beginning of a journey back to respect," she said.

Morse said Yahoo's growth priorities were to win in display advertising market, increase its search volume and boost revenue per search, and squeeze more revenue from the company's international audience.

Morse said a share gain of about 5% in the U.S. display-ad market would increase revenue by about $650 million a year, while closing the search monetization gap with market leader Google Inc. (GOOG) would generate an additional $300 million. He also said boosting average revenue per user from Yahoo's international users by 50% could add $500 million per year.

He also outlined a series of spending strategies designed to help the company grow faster now and save more money in the future.

"We cannot just let costs happen to us," said the recently hired Morse.

A number of other executives also highlighted the company's reach and scale as a media brand, as well as discussed Yahoo's efforts to speed up the development of new technologies and products.

Chief Technology Officer Ari Balogh said Yahoo's model is very simple: Engaging its broad audience and gathering insights about their behavior so the company can provide them with better online experiences and better targeted ads.

"This is all about how we execute," Balogh said.

Yahoo last week reported that its third-quarter profit surged due to cost cutting and asset sales, even as revenue fell 12% compared with a year ago. Relieved analysts said the results indicated that Bartz has made some headway since taking over the company in January.

But Bartz, who was named chief executive amidst the worst advertising slump in decades, still has to prove she can reinvigorate the struggling Internet giant and convince investors, employees and customers that she has a strong vision for the company.

Shares in Yahoo closed down 3.9% at $16.04 Wednesday.

-By Scott Morrison, Dow Jones Newswires; 415-765-6118; scott.morrison@dowjones.com