Yahoo Shares Surge on Profit Hike
Yahoo Shares Surge 23 Percent After Third-Quarter Profit Tops Estimates
Thursday October 10, 5:01 pm ET
Associated Press
By MICHAEL LIEDTKE, AP Business Writer
SAN FRANCISCO (AP) -- Shares of Yahoo Inc. surged 23 percent Thursday after the company said third quarter revenue doubled and profits came in ahead of expectations as more people began paying for its online services.
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After the markets closed Wednesday, the Sunnyvale-based company said it earned $28.9 million, or 5 cents per share, in the three months ended in September, reversing a loss of $24.1 million, or 4 cents per share, at the same time last year.
The results were a penny better than the consensus estimate among analysts surveyed by Thomson First Call.
Yahoo's third-quarter revenue totaled $248.8 million, a 50 percent improvement from last year. Excluding the boost that the company received from a job listing site acquired earlier this year, Yahoo said its third-quarter revenue rose 36 percent.
One-third of Yahoo's third-quarter revenue came from subscriptions and listings on its help-wanted service, HotJobs, which was acquired for $439 million eight months ago.
The $83.1 million that Yahoo collected from fees and listings during the third quarter more than doubled from a year ago. The gains delighted Yahoo chief executive Terry Semel, who vowed to make the company less dependent on advertising after taking the helm last year.
"We find ourselves stronger, smarter and well prepared to take advantage of the opportunities ahead of us," Semel assured analysts during a conference call Wednesday.
Yahoo signed up about 500,000 new subscribers in the third quarter, giving it more than 1.5 million dues-paying users.
Most of the subscribers pay for Yahoo's Internet access service, premium e-mail accounts and matchmaking service, said Susan Decker, the company's chief financial officer.
Yahoo hopes to lure even more subscribers with a new online gaming service and a high-speed Internet access service introduced last month with telecommunications giant SBC Communications.
"We still have an awful lot of room to roam," Semel said.
In a sign of its optimism, Yahoo raised its revenue estimates through 2003.
The company projected its 2002 revenue will range from $930 million to $955 million, above analysts' consensus estimate of $926 million. Next year, Yahoo said it revenue may approach $1.2 billion, topping a peak of $1.1 billion reached in 2000 when the company was awash in online advertising.
With its advertisers fading away in the dot-com bust, Yahoo had suffered six consecutive quarterly losses before registering a profit during the spring.
The turnaround efforts still haven't won back investors who once made Yahoo one of Wall Street's hottest stocks.
Yahoo's shares soared $2.29 to close Thursday at $12.27 on the Nasdaq Stock Market. The company's stock peaked at $237.50 in early 2000.
Besides announcing its third-quarter results, Yahoo also revealed that it renewed a key contract to have its search engine powered by Google.
Analysts had speculated Yahoo might stop working with Mountain View-based Google because its own Web site has emerged as one of the Internet's most popular destinations. The new contract doesn't prevent Yahoo from using search results from other providers.
Several other search engine companies, including Inktomi and Fast Search & Transfer, have been making a pitch for Yahoo's business.
Yahoo didn't disclose the terms of its new contract with privately held Google. The company paid Google $7.1 million for search services last year, according to Securities and Exchange Commission filings.
Through the first nine months of this year, Yahoo lost $3.4 million, or 1 cent per share, on revenue of $667.3 million. At the same point last year, Yahoo had lost $84.1 million, or 15 cents per share, on revenue of $528.5 million.
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