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Yahoo! a bid target
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March 8, 2001: 10:25 a.m. ET
Internet portal becomes a bid target after issuing profit warning
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LONDON (CNN) - Yahoo! could become fair game for a hostile takeover, after issuing a profit warning and began looking for a new boss on Wednesday.
Analysts told CNN that media conglomerates Bertelsman, Vivendi, Viacom, Disney and AT&T could be possible bidders, particularly if Yahoo's share price falls below $10.
The same analysts agree that Yahoo! can't survive in its present format or with its present management team. Speculation is rife that management have disagreed over Yahoo's long-term strategy.
"Yahoo has grown because of the growth of the Internet. But until now it has never had to exist in the present climate," Aberdeen Technology's Ben Rogoff told Richard Quest of CNN's Business International.
Yahoo! has relied on online advertising for around 80% of its revenue and been referred to, rather disparagingly, as a glamourised search engine.
Other Internet portals have introduced business models to create a billing relationship with their users through subscriptions. This relationship can then be extended through other mediums such as mobile phones, hopefully creating further revenue.
With the general slowdown in online advertising, building an ongoing relationship with its audience seems to be the more acceptable business model.
Rogoff believes there are only two successful models for Internet portals -- those with subscription services and the big auction sites. Yahoo! has around 100 million users so if it charged a subscription, substantial revenues could be raised.
The failure of Yahoo! to adapt and change its model resulted yesterday in Nasdaq ordering the suspension of trading in Yahoo! shares pending Yahoo!'s profit warning.
Yahoo!'s outgoing chief executive Tim Koogle said that "a broad range of customers have delayed their spending across all media formats until their economic outlook improves.
As a result, we expect revenues and profits to be reduced most significantly in the marketing services area of our business in the first quarter."
Yahoo! expects 2001 revenues in the range of $170 million -- $180 million compared to analysts' forecasts of around $232 million. First quarter pro-forma earnings before interest, tax, depreciation and amortisation and net income are expected to break even. .
It seems advertisers aren't convinced by the effectiveness of online advertising particularly the traditional banner ads found on web sites.
Also, says Henderson Investors' Robert Carnegie: "A lot of advertising on the web actually came from within the Internet industry. Now that the Internet bubble has burst, that has virtually disappeared. Many old-economy companies still question the effectiveness of advertising on the Internet choosing, rather, to stick with more traditional advertising mediums."
Koogle's announcement that Yahoo! would be searching for a new chief executive to replace him didn't, therefore, come as a surprise and more management changes are expected. Koogle will, however, remain as chairman once a replacement has been found.
The Yahoo! share price was suspended at $20.94 and fell to $18.56 in after-hours trade a far cry from its peak of $205 last year. On Thursday, in Frankfurt, the share had dropped 15.5% to Euro19.10. 
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