Yahoo's good show fails to impress investors, stocks slide 13%

Yahoo's good show fails to impress investors, stocks slide 13%

	Published : Wed, 18 Jan 2006 09:10 By : Amy Watts Print this Story

SAN FRANCISCO: Yahoo Inc. posted Tuesday what has been described by analysts as disappointing earnings for its fourth quarter showing higher operating costs. The reaction was imminent and the world's largest internet media company's shares went down 13 per cent.

The Sunnyvale-based company's net income rose 83 per cent to $683 million, or 46 cents per diluted share, from $373 million, or 25 cents a share, a year earlier, as it was aided by an investment gain. The quarter took into consideration a one-time gain of $310 million tied to its purchase of a stake in Chinese e-commerce site Alibaba. If not for this gain and other accounting items unrelated to its ongoing operations, Yahoo said it would have earned 16 cents per share.

Gross revenue rose 39 per cent to $1.5 billion. Revenue, excluding traffic acquisition costs, rose 36 per cent to $1.07 billion.

For all of 2005, Yahoo earned $1.9 billion, or $1.28 per share, on revenue of $5.26 billion. Its net income for 2004 had totaled $839.6 million, or 58 cents per share, on revenue of $3.57 billion.

Yahoo said its 2006 revenue will range from $4.6 billion to $4.85 billion, excluding its ad commissions. Analysts estimate the average revenue to be $4.77 billion.

Initially Yahoo shares gained 21 cents to close at $40.11 on the Nasdaq, but plunged $5.13, or 12.8 per cent, in extended trading.

This is the second consecutive quarter when the company's stocks were punished by investors in spite of the company putting up robust growth. It is reflective of the high hopes attached to the company's ability to perform in the internet advertising boom.

Several analysts are of the opinion that Yahoo has not been able to evolve a strategy to combat rival Google, which has been fairly successful in reaping the benefits from the online advertising programme. Both Yahoo and Google put up text-based ads on hundreds of websites in addition to their own, but only get paid when the links are clicked on.

Yahoo Chairman Terry Semel said the company has developed technology for a new advertising format and would be introducing the same later this year. Yahoo is set to lose its largest advertising partner, Microsoft Corporation, which is launching its own network soon. Yahoo said it would lose around $120 million in advertising revenue from its partners this year, mainly Microsoft.

Semel said profit was affected by several small factors, including a few acquisitions and the sale of its Chinese operation to Alibaba. However, the company's core advertising business and its operating cash flows grew well, and he was unconcerned about quarterly variations.

After Yahoo reported its resulted, other internet stocks too fell. Google was down 3.3 per cent, eBay Inc. dropped 4.6 percent, Amazon.com Inc. lost 3 per cent and Baidu.com Inc. 3 per cent.