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Yahoo Profit Beats Forecasts

Internet: 3rd-quarter report shows jump to 13 cents a share. But warning of slipping ad sales sends stock down.

October 11, 2000|From Times Staff and Wire Reports

SANTA CLARA, Calif. — Yahoo Inc. on Tuesday reported better-than-expected earnings and revenue for the third quarter but its shares fell 8% in after-hours trading as the company cautioned that weakness in Internet spending is likely to continue.

Yahoo, the first of the major Internet companies to report results, said earnings jumped to $81.1 million, or 13 cents a share, on a pro forma basis, from $38.5 million, or 6 cents, a year ago. Analysts on average were expecting 12 cents, according to First Call/Thomson Financial.

Revenue jumped 90% to $295.6 million, beyond the consensus analyst estimate of $281 million, according to First Call. The revenue growth from the previous year was lower than in earlier quarters, however.

Yahoo executives said on a conference call that the 200 largest advertisers on Yahoo's site contributed 60% of advertising revenue as they bought more ads and signed longer contracts. But the number of companies advertising with it has dropped from 3,675 to 3,450.

"We still think that we're not, the industry is not out of the woods yet," Yahoo President Jeff Mallett said in an interview regarding the weakness among Internet companies, many of which are major Web advertisers. But he added that less than 10% of his company's revenue comes from "financially questionable" clients.

He said that although 10% of Yahoo's revenue derives from advertising barter agreements--often a sign of weakness for smaller Internet firms--much of Yahoo's barter is with established media companies, and that the firm's outside accountants do not see such revenue as a danger going forward.

As for the Internet sector's overall investment trajectory, Mallett said, "We're out of the first phase, the first five years of the Web," during which an expectation of a fast return reigned. "Now the market is going to reward market leaders."

Shares of Yahoo, which finished regular trading down $3.06 at $82.69 on Nasdaq, fell to $76.25 in after-hours trading.

Yahoo's earnings reports often are eagerly awaited because the company has consistently outperformed expectations and it is one of the few "blue-chip" Internet firms that have turned a profit.

But with many Internet companies slashing their marketing budgets or simply calling it quits, investors were looking at Yahoo's online ad revenue as a reflection of the health of the Internet industry.

Yahoo said its cumulative registrations for member services grew to a record 185 million, up from 155 million in June.

The company's traffic rose to 780 million page views per day on average during September, compared with an average of 680 million page views per day in June 2000.

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Yahoo shares dropped as low as $76.25 in after-hours trading despite reporting better-than-expected earnings. The shares had closed at $82.69 on Nasdaq before the results were released.

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Yahoo shares, monthly closes and latest on Nasdaq

Tuesday: $76.25 (after-hours quote)

Source: Bloomberg News

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