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Yahoo! beats estimates
Internet media firm posts better-than-expected sales and earnings. Stock up after-hours.
October 9, 2003: 3:51 PM EDT
By Paul R. La Monica, CNN/Money Senior Writer

NEW YORK (CNN/Money) - Yahoo! said Wednesday that earnings more than doubled in the third quarter due to strength in its bread-and-butter Internet advertising business, surpassing analysts' forecasts.

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The Internet media company reported net income of $65.3 million, or 10 cents a share, up from $28.9 million, or 5 cents, a year earlier. Analysts were expecting the company to earn 9 cents a share, according to earnings tracker First Call.

Sales jumped 43 percent to $357 million, well ahead of the Wall Street consensus estimate of $338 million.

Shares of Yahoo! (YHOO: Research, Estimates) initially surged 3 percent to $39.95 in after-hours trading soon after the report was released but cooled off a bit after the initial euphoria. The stock was up about 1.5 percent after-hours at the beginning of the company's analyst conference call.

The stock fell 14 cents in regular trading on Nasdaq Wednesday but had surged more than 10 percent in the first few days of October, in anticipation of the report. Yahoo! is up more than 135 percent year-to-date as investors have embraced Internet stocks due to strong growth. So the muted response after-hours may have been due to extremely high expectations, i.e. Yahoo! not beating by more than a penny per share.

Still, Steve Weinstein, an analyst with Pacific Crest Securities, said the report was very positive and that in particular, Yahoo! showed strong growth in its core business of attracting Internet advertising.

Revenue from Yahoo!'s advertising business, which it calls Marketing Services, accounted for nearly 70 percent of total sales. Revenue increased 48 percent from a year ago to $245.1 million.

Yahoo!'s two other business lines, fees and listings, also showed healthy levels of growth. Fee-based business, which includes things like premium e-mail, personals and a DSL partnership with Baby Bell SBC, increased 38 percent to $79.4 million. Revenue from Yahoo's listing business, made up mainly of resume and career search site HotJobs, increased 26 percent to $32.4 million.

The company has been trying to get more customers to sign up for paid services, in order to lessen its reliance on Internet advertising. To that end, CEO Terry Semel said during the conference call that the company ended the third quarter with 4.2 million fee- paying customers, up from 1.6 million a year ago.

Yahoo! also said sales for its fourth quarter, excluding traffic acquisition costs associated with the recent purchase of sponsored search company Overture Services, would be between $390 million and $430 million. Excluding the traffic acquisition costs, Yahoo! said revenue would be between $462 and $502 million. The current consensus estimate for the quarter is $374 million, according to First Call.

Traffic acquisition costs refer to the amount of money that Overture, which provides sponsored search listings to other Internet companies, such as Microsoft's MSN, shares with its affiliates. Sponsored searches allow advertisers to have their ads tied to specific keywords.

But there have been some questions about how much longer Microsoft would maintain a business relationship with Overture since Microsoft is bulking up its efforts to compete against Yahoo! in the search arena. Microsoft has the right to terminate its contract with Overture upon a change of control in the company. Semel said, however, that he was hopeful Microsoft would remain an Overture customer.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.