Overture stock slumps as analyst raises concerns
PALO ALTO, Calif., Nov 1 (Reuters) - Shares of the Internet advertising business Overture Services Inc <OVER.O> fell more than 16 percent on Friday after one analyst downgraded the company and said it was vulnerable to increased competition.
Overture was the third biggest declining stock on Nasdaq, dropping $4.48 to close at $23.05, after Salomon Smith Barney analyst Lanny Baker reduced his rating to "in line" from "outperform," and cut earnings estimates for 2003.
Baker said his analysis of Overture suggested it was getting most of its profit from its smallest partners, who might seek more favorable advertising partnerships from other companies such as Google.
Pasadena, California-based Overture, one of the most successful Internet companies, is consistently profitable and often exceeds Wall Street forecasts for sales and earnings.
The company sells ad space for inclusion in search engine results -- also known as paid listings -- an area that has grown into a thriving business as other online advertising models have failed to take off.
Until recently, Overture was the only major player in paid listings, but Google has made an aggressive push into the space over the past year.
In his research report, Baker said that some of Overture's smaller partners may see Google as a preferable partner, offering better terms.
"Google's large free distribution channel ... may enable Google to put pressure on Overture's network and/or its margins," he wrote.
Overture Chief Executive Ted Meisel, responding to the new research said: "I am not in a position to talk about Google's business, but we like our own."
Meisel said the company continues to expect "much higher revenues and profits" next year.
11/01/02 18:3 |
