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Yahoo! sees red
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June 18, 1998: 4:12 p.m. ET
Web directory says Viaweb charge, revenue slowdown will cause '98 loss
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NEW YORK (CNNfn) - Internet directory Yahoo! Inc. warned Thursday that its string of five consecutive quarters of profitability will likely come to an end in the second quarter.
Yahoo! said it expects to post a loss for the second quarter and would likely end 1998 in the red.
The company blamed the gloomy forecast on the cost of a recent acquisition and the likelihood that revenue growth will slow.
In a Securities and Exchange Commission filing, Yahoo! said it expects to record a one-time charge of about $45 million in the second quarter to fund its purchase of Internet software maker Viaweb Inc.
Yahoo! earlier this month announced it was buying Viaweb for $49 million in stock. The remaining $4 million will be amortized over a three-year period.
"As a result of the expense to be incurred in the second quarter of 1998, the company anticipates reporting a net loss for such quarter and for the year ending Dec. 31, 1998," the company said.
The company also warned its operating expenses would increase significantly in the future as it expands sales and marketing efforts and continues to develop the Yahoo! brand.
As of March 31, the company had a deficit of $23.6 million.
Like many Internet stocks, Yahoo! (YHOO) shares have soared recently. The company had been trading near its 52-week high, but closed Tuesday down 2-1/8 at 127 3/4.
(Click here to see a 52-week stock chart)
Yahoo! cautioned that competition will likely continue to increase in the search and directory businesses. As Yahoo! adds more services, the number of competitors will also continue to increase, officials said.
In addition, the company expressed concern that its traffic could fluctuate as the two major browsers more tightly integrate search functions into their own products. Netscape Communications Corp. is in the midst of a major drive to increase traffic to its Netcenter site and Microsoft Corp. is currently developing its own search engine for Internet Explorer.
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Yahoo!
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