|
Yahoo! wows Wall Street
|
 |
July 8, 1998: 8:41 p.m. ET
Search engine posts 15c/shr operating profit, declares 2-for-1 stock split
|
NEW YORK (CNNfn) - Internet search firm Yahoo! Inc. posted better-than-expected second quarter results Wednesday, reflecting surging revenues and booming traffic.
Separately, the Santa Clara, Calif.-based company declared a 2-for-1 stock split and announced it received a $250 million investment from Softbank Holdings Inc.
Yahoo!, the largest of the Internet-search firms, is widely regarded as a bellwether for Internet issues. As such, analysts said the company's solid second quarter results could set the stage for another rally on Thursday.
"At the end of the day, it's earnings that matter and it's earnings that are going to drive stock prices and I think it's going to be the Yahoo! earnings upside that really lights up the board tomorrow for Internet stocks," David Readerman, analyst with Nationsbanc Montgomery Securities told CNNfn's "Digital Jam" Wednesday.
Profit beats Wall Street
Yahoo! reported a profit before one-time items of $8.1 million, or 15 cents a share in the three months ended in June, up from $300,000 or one cent a share a year ago. Revenues surged 192 percent to $41.2 million.
The operating profit easily beat Wall Street's estimate of 9 cents a share, sending shares of Yahoo! and other Internet-related firms soaring in after-hours trade.
"It was a great quarter for the company. Revenue growth was much stronger than anticipated," said Andrea Williams, analyst at Volpe Brown Whelan.
After adjusting for a $44.1 million charge related to its previously announced acquisition of Viaweb Inc., the company posted a net loss of $36 million, or 81 cents.
That compares with a net loss of $21.5 million, or 50 cents, in the second quarter of 1997, which included a $21.2 million charge related to a restructuring of its Visa Marketplace operations.
Page views jump 20 percent
Page views, which help Yahoo! set advertising rates, continued to grow during the quarter to an average of 115 million per day in June from 95 million in March. A page view is defined as one electronic page of information displayed in response to a user's request.
Meanwhile, the number of advertisers on Yahoo! rose to 1,800 from about 1,600 in the first quarter of 1998.
News of Yahoo!'s results sent shares of the company soaring 15-13/16 points in after hours trade to 202. And the news helped further buoy the already-upbeat sentiment for Internet stocks.
In Instinet trading, Netscape (NSCP) jumped to 39 from an earlier close of 37-1/16; Excite (XCIT) rose to 95 from 91-3/8; Lycos (LCOS) traded at 82-1/2 up from 77-1/2; and Amazon.com (AMZN) traded to 113, up from its close of 107-1/8.
In recent weeks, the sector has benefited from heightened optimism fueled by interest from strategic participants such as media companies and communications giants. In addition, deals like the AT&T Corp.'s (T) $48-billion acquisition of Tele-Communications Inc. (TCOMA) has reinforced views that infrastructure capacity will increase in the near future.
Internet stocks have been on a wild ride recently, with investors clamoring to grab hold of so-called franchise companies, such as Yahoo!, America Online and Netscape Communications Corp.
The frenzy has led to remarkable valuations for Internet stocks. For example, Yahoo! currently trades at roughly 350 times earnings, meaning investors are willing to pay $350 for every $1 in profits.
Readerman said investors appear willing to pay a premium for leading brands such as Yahoo! because they can deliver sustainable revenue growth and increased traffic figures.
In order to increase the liquidity of the stock, Yahoo!'s board approved a 2-for-1 stock split, payable July 31 to shareholders of record on July 17.
At the end of the quarter, Yahoo! ended with $147 million of cash reserves. With the addition of proceeds from the Softbank private placement, the cash balance will increase to nearly $400 million.
Yahoo! has no outstanding debt.
As part of the $250 million private placement, Softbank will acquire 1.36 million newly issued Yahoo! shares. The number of outstanding stock will rise 3 percent to about 48 million shares.
As a result, the Japanese software company will increase its ownership interest in the company to about 31 percent.
During a conference call with analysts, company officials said they had no immediate plans for the capital.
"The cash gives us the freedom to fund our growth in the near future," said Gary Valenzuela, Yahoo!'s chief financial officer.
However, Valenzuela and President and Chief Executive Tim Koogle acknowledged that sales and marketing expenses will increase on an absolute dollar basis, but are likely to decline as a percentage of revenue.
Officials said the company plans to focus sales and marketing resources on expanding the company's global work force and reinforcing its brand name.
|
|
|
|
|
|
Yahoo!
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
