7/11....Reliable Yahoo! Fails To Fail
By Amy Doan
Forbes.com
Yahoo! is already in the advertising, broadcasting, commerce and community businesses.
Now it is apparently in the comfort business as well. Along with its announcement today that it beat earnings estimates and grew both net income and revenue by more than 100% over last year, Yahoo! (Nasdaq: YHOO - news) dispensed what it called ``comforting'' news to anyone fretting about the prospects of online advertising and e-commerce.
The Santa Clara, Calif., company beat estimates for its second quarter ended June 30 by two cents a share, with earnings of $74 million, or 12 cents per diluted share, compared with $27 million, or five cents per share, this time last year. Revenue for the quarter was $270 million, up from $129 million for the quarter last year.
While revenue continues to soar and it is hard to find much gloom in other metrics, the company's page views are something of a disappointment, even considering a summer slowdown in Internet usage. Page views increased 9% since March, to 680 million, in June. Yahoo!'s page views have consistently increased by 20% to 40% in past quarters, and Merill Lynch analyst Henry Blodget had expected views would slow to only about 15% to 20%.
Yahoo!'s stock has been sliding since January, and it neared its low for 2000 today. Several analysts have predicted since June that the company's growth will slow down as cash-strapped Internet startups start limiting their online advertising budgets.
``Everyone's looking at the Yahoo! call as a window into the next six months of online advertising,'' says Carolyn Trabuco, an analyst with First Union Securities in New York.
As a result, Yahoo! has been pounded with requests for more detail about its advertising income, including what percentage of revenue comes from ads rather than Internet commerce.
Anyone expecting that the company's new Chief Financial Officer Susan Decker would open up the books wider than retiring CFO Gary Valenzuela was in for a disappointment today.
But Decker did throw out crumbs in response to concerns about Yahoo!'s reliance on startup advertising. The company's ``exposure to financially questionable clients is less than 10% of our revenue,'' says Decker, based on an ``exhaustive'' analysis of Yahoo!'s customers which included their cash positions. Decker also says that more than 25% of the company's revenue comes from business services and international advertisers.
Yahoo!'s President and Chief Operating Officer Jeffrey Mallett offered that 98% of the company's top-100 advertisers and all of its top-50 advertisers were retained over the quarter.
The figures came as welcome news to shareholders. Yahoo!, which finished today down 4.1%, at $105.50, popped up nearly $8 in early after-hours trading.
But the company's careful reassurances are actually bad news for dot-coms that aren't yet ``blue chips'' like Yahoo!. Yahoo! relies less on small advertisers than many other Web companies which have yet to report. DoubleClick (Nasdaq: DCLK - news) is viewed as a better test of overall online advertising budgets because it is less diversified than Yahoo! and reflects the health of small- and mid-sized advertisers. New York-based DoubleClick announces its earnings on July 18.
Comfort food, anyone?
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Heehaw If You're Long Yahoo!!
By James J. Cramer
Originally posted at 8:58 PM ET 7/11/00 on RealMoney.com
People blew this Yahoo! (YHOO:Nasdaq - news) call. Everyone got too negative, whether it was analysts who, right up until the day the company reported, insisted there was no upside.
Or traders who bought puts by the boatload betting that the stock was a broken stock. (TSC reported on the put buying earlier.) All day Tuesday I was bombarded by chartists who told me I had no idea what I was talking about in buying this stock.)
How did this happen? I think it happened because, first, Yahoo! is like no other Internet company. It is not a sieve. It is close-lipped and honest and tells people very little about how the quarter went.
Second, we all began to believe that every dot-com's problems were shared across the board. In reality, the problems of the other dot-coms really are the advantages of Yahoo!.
Finally, people are so quick to think that Yahoo! is a traditional newspaper or magazinelike player with a giant stream of dot-com revenue.
Wrong!
Yahoo! has an extremely complex business model that involved tremendous streams of payments from many content players through the form of index deals. (TheStreet.com has one.). Yahoo! does not just make money selling banners.
It is a business-to-business site and a TV site -- that business did quite well, by the way, and a games site and a reference site and much, much more. And almost everyone pays Yahoo! to be on the site! It is as if the makers of TV programs paid ABC and CBS to run their programs!
Sometimes this game comes down to psychology. This morning, when Mary Meeker threw in the towel with her no upside comments, that was about all she wrote. That was enough to make everyone throw up.
That's when you had to step up, with us, and buy more. (I detailed this buy on RealMoney.com right at the time of making it.) That's when the biggest home runs are hit.
Don't succumb to the universal negativity when it sets in. You will never make a dime that way. And remember how negative everyone was this morning about Yahoo! And remember how wrong they all were. |
