Yahoo ( $26)sees weak 2001
Citing a softening economy and the loss of dotcom clients, Yahoo (YHOO) today projected 2001 earnings of 33 to 43 cents per share, some 25 percent to 42 percent lower than analysts expected.
The Web portal also said its fourth-quarter earnings were 13 cents per share, in line with analyst estimates and up from 9 cents per share in the year-ago quarter.
Yahoo shares were off 22 percent in after-hours trading, although analysts cautioned Monday that the stock would be erratic and potentially misleading immediately after the earnings report thanks to short-covering and other trading patterns.
Bad news
Still, Yahoo's 2001 warning was clearly bad news, as it was off from already-lowered analyst numbers.
Just Monday ABN Amro cut its 2001 estimate on Yahoo from 61 to 57 cents a share, the consensus analyst estimate, according to First Call. Yahoo's substantially reduced estimate is lower, for the first time, than the year-earlier total, which was 48 cents a share in 2000.
It's not just Yahoo's earnings that are projected to suffer in 2001. Revenue growth will suffer, too, with sales rising just 9 percent to 18 percent, to $1.2 billion to $1.3 billion, Yahoo estimates. That's substantially less than the 15 percent to 25 percent most analysts were looking for even after revising their number downward over the past month and a half.
The company also projected diminished margins -- down from 37 percent in 2000 to 25 to 30 percent in 2001.
The portal's miss is troubling not only for Yahoo but for the entire Internet sector, as Yahoo is considered a bellwether dotcom stock.
Reflecting eroded confidence in Internet startups, Yahoo CFO Sue Decker said in a conference call with analysts that the company wants to sell its advertising and services chiefly to large, established corporations rather than to more shaky dotcoms. If nothing else, she said, the softened ad market has brought Yahoo "the blessing of economic Darwinism," forcing it to derive its revenue from more reliable sources.
"2001 will be a transition year," Decker said. "We will respond to the global economic slowdown and complete a realignment of our client base."
In the meantime, she said, Yahoo will experience a short-term decline in the amount of revenue it makes per user as it loses advertisers.
Historically conservative
Of course, it should be noted that Yahoo has a long history of making extraordinarily conservative earnings estimates and, when business is as strong as it hoped, blowing them away.
Indeed, Yahoo executives said in the conference call that they formulated their 2001 estimate conservatively, extrapolating the weak conditions in the fourth quarter out for the whole of 2001.
"You know our style," said CEO Tim Koogle. "We are trying very much to be prudent managers ... We try to lay out a plan and meet or exceed it over time."
Yahoo's advertising rates, or CPMs, actually increased slightly during 2000, he said. |
